No-Fault Insurance

What is Michigan No-Fault insurance?

No-Fault Insurance exists within a dozen or so states within the U.S., although Michigan has one of the most extensive policies. No-Fault Insurance was introduced in Michiganin 1973. It was designed to solve a number of perceived problems with the auto insurance system. Effectively,the no-fault insurance system functions as a state-level insurance scheme, whereby all drivers within Michiganare covered with basic coverage.

The primary goals of the no-fault system were to raise the amounts of benefits paid to those who were injured, or the families of those who were killed, while also reducing premium costs by eliminating legal and administrative costs.

In addition, because of the reduced bureaucracy involved in state-run insurance, payments were designed to be made more promptly.

In effect, the no-fault policy removes the need for third parties to be involved in the vast majority of insurance claims. The state coordinates with individual insurance companies, thereby removing the need for any party to sue one another.

In return for medical and wage loss benefits from the state, Michigan drivers lose the right to sue as a result of motor accidents in all but the most severe of cases. Every registered car in Michigan must have no-fault insurance.

  • To pay for the policy,
    in 1978 Michigan established
    the Michigan Catastrophic
    Claim Association, which pays
    for claims by insurers above a
    certain amount.
  • This effectively covers the
    insurance companies and
    allows for each policy sold
    to pay a small amount
    into a central fund
    administered by the state.

What happens if I don’t have it?

If you are caught driving without no-fault insurance coverage, you can be fined $500, jailed for up to a year, or both.

If you cannot provide proof of insurance, you may be banned from driving for up to 30 days. If you have an accident and do not have no-fault insurance, you are personally liable for any expenses that occur.

Similarly, you can also be liable if you allow someone to drive in your car without insurance, as well as if you drive another person’s car without the car having no-fault insurance.

The vast majority of drivers are eligible for no-fault insurance, although, in some circumstances, you may be denied coverage. For example, if you have lost your license, you have been recently convicted of insurance fraud, you have recently been found guilty of a DUI, or your car does not meet safety requirements, you may be denied insurance from certain providers.

In these instances, you can apply to the Michigan Automobile Insurance Placement Facility, who will be able to advise on companies that can provide this for you. Otherwise you can get Michigan no-fault insurance quotes from us.

What are the three parts of No-Fault Insurance?

A basic no-fault policy has three key elements to it, each designed to cover different consequences of an accident. No-Fault insurance covers all family members living in the same house, even if they are in another person’s car when the accident takes place.

Personal Injury Protection (PIP)

Personal Injury Protect pays all of the medical costs resulting from an auto accident. This hasno maximum and requires only that the medical expenses are deemed to be necessary.

Your PIP coverage can be coordinated with your health coverage in some cases, although Medicaid, Medicare, and some private health plans do not allow this. In these instances, the PIP will cover all costs after your benefits from your existing health plan are exhausted.

In either scenario, the coverage is designed to avoid you being out of pocket as a result of health issues from an auto accident. The Michigan no-fault law requires insurance companies to offer a discount when you coordinate health/disability benefits with your no-fault policy. This can greatly reduce the cost of your auto insurance because your potential health costs are reduced.

  • The PIP will also pay up to 85% of equivalent wages you would have earned if you are unable to work as a result of your accident.
  • This amount is recalculated annually on 1 October, so can change midway through the three-year payment process. As of 10/1/17, the maximum payment is $5,541/month.

If you are killed in an auto accident, the PIP will pay your family for three years, based on your earnings. Again, the maximum amount you can be paid under this is fixed annually and is currently(as of 10/1/17) at $5,541/month.

In addition, you may also receive financial compensation (up to $20 a day) to cover payments for services you’re not able to undertake yourself (if you require housekeeping, for example).

Property Protection (PPI)

Property Protection is designed to cover the damage to property done in an accident. At present, this covers up to $1 million for the damage a car does to property such as buildings, fences, and other cars (although only if the car was legally parked). PPI does not pay for other damage to cars, although this may be covered in your collision or comprehensive coverage plan (for more information on this, see section below).

Residual Liability Insurance – Bodily Injury and Property Damage

Residual Liability Insurance will cover your defense costs (and any damages) that you are liable forthat occur as a result of an auto accident. Generally, the no-fault law protects holders from being sued. However, you can still be sued if you meet any of the following criteria (as outlined by the Michigan State government):

  • If you cause an accident in Michigan in which someone is killed, seriously injured, or permanently disfigured.

  • If you are involved in an accident in Michigan with a non-resident who is an occupant of a motor vehicle not registered in Michigan.

  • If you are involved in an accident in another state.

  • For up to $1,000 if you are 50% or more at fault in an accident which causes damages to another person’s car which are not covered by insurance.

Under the basic no-fault policy, if you are found legally responsible for causing an auto accident, you are covered for the following amounts:

  • Up to $20,000 for
    someone hurt or
    killed in an accident.

  • Up to $40,000 for each
    accident if several people
    are hurt or killed.

  • Up to $10,000 for
    property damage
    outside of Michigan.

This is known as 20/40/10 coverage and is the legal minimum. In cases where courts award more than these damages as a result of a car accident, you are responsible for paying the difference.

Therefore, it is optimal to have additional insurance beyond the basic no-fault plan.

What does No-Fault Not Pay for?

Although no-fault is designed to cover you for emergencies and to diminish the impact on uninsured drivers, it is far from a comprehensive policy.

Things that are explicitly not covered by Basic No-Fault Insurance are:

  • Repairs to your vehicle after an accident.

  • Repairs to someone else’s vehicle after an accident (unless the vehicle was parked legally).

  • Costs for replacing a stolen vehicle.

‘Mini tort’ claims (recovery of sums under $1,000 for vehicle damage, paid for by the liable driver).

The no-fault system
does not cover any compensation
for ‘pain and suffering’, nor any
other non-monetary damages,
which are often a key feature of
third-party insurance claims.

What insurance do I need to buy?

Because of what basic no-fault insurance doesn’t cover, many drivers in Michigan look to take on more advanced coverage. These extra insurance policies will cost additional money, although will pay out in a broader range of cases, and will cover factors not included in the no-fault insurance policy. If your car is a lease or bought on finance, then the lender may require that you buy collision and comprehensive coverage. Check with your individual lender to see if this is the case.

Collision and Comprehensive Insurance

The only time damage to your car is covered by the no-fault insurance policy is if your car is parked, and parked in a legal manner. In all other instances (i.e. when driving, or if improperly parked) any damage to your car is your own responsibility.

Collision coverage will pay for damage to your car if it is involved in a crash. The three types of collision coverage are:

  • Limited

    Limited collision coverage will not pay for repairs to your car if you are more than 50% responsible for a crash. If you are 50% or less at fault, then your insurance will pay for the cost of repairing the car above a pre-arranged deductible.

  • Standard

    Standard collision coverage will pay for repairs to a car, regardless of fault, except for the pre-arranged deductible.

  • Broad form

    Broad form collision coverage will pay all of your costs for repairs to a car. In cases where you are more than 50% responsible for the crash, you are responsible for paying your own deductible, although where you are 50% or less responsible, your insurance will not require you to pay the deductible.

Generally, the higher the cost of your deductible, the lower the cost of your collision insurance, since it is less likely that the insurance company will need to pay for repairs, and reduces the amount they will have to pay.

It is law in Michigan that when you buy insurance, your insurer must make clear the rules of the policy you are buying. If you don’t want a certain type of coverage, you can simply sign a written statement saying that you do not want that level of coverage.

Comprehensive insurance covers your car for damages caused by anything other than a collision (such as hitting an animal, being damaged by fire or flood, or objects falling on your car) as well as your car being stolen. Comprehensive insurance often doesn’t cover personal items that may be damaged or stolen while in your car.

  • Limited Property Damage Liability Insurance (‘Mini-Tort’)

    Limited collision coverage will not pay for repairs to your car if you are more than 50% responsible for a crash. If you are 50% or less at fault, then your insurance will pay for the cost of repairing the car above a pre-arranged deductible.

  • Towing and Rental Car Coverage

    This additional insurance covers the cost ifyou car requires towing and if you require a replacement rental car. This is usually an add-onto an existing policy.

  • Uninsured Motorists Insurance

    Uninsured Motorists Insurance is a policy that will cover you in the case of an accident involving a motorist without insurance (or a hit and run). These policies will also cover you for pain and suffering (and potentially other non-monetary damages) as well as wage loss.

    It may also make payments to your family in the eventuality that you are killed. Without this, you may be liable for all costs resulting from a collision with an uninsured driver, including damage to car, property, or medical bills.

What to do if you have an accident

If you have an accident in Michigan, the first step should always be to inform the police. You should make every effort to remain safe, whether that be to pull over somewhere out of traffic or to ensure the safety of other road users.

You should exchange names and insurance details with the other driver or drivers. Take photos of the damage to your car and to the other car involved.

  • You should then contact your insurance company or agent as soon as possible and file a claim. You may require a police report number to do so.

  • You should send your insurance company any information you may have (including the other driver’s details, your account of the incident, as well as the photos you have taken).

In the case of any problems with your insurance company, you can contact the Michigan Department of Insurance and Financial Services.

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