April 30, 2017

Auto Insurance Facts

What is no-fault?
What coverages are mandatory?
What coverages are optional?
About the Michigan Catastrophic Claims Association
What is a mini-tort?
Comparison of auto insurance premiums by state

What is no-fault?

Michigan is recognized as having the highest auto insurance medical benefits in the United States. The average premium is 6th highest in the country at $1,264.21 per car, according to the National Association of Insurance Commissioners 2013 study.

Michigan's no-fault law became effective October 1, 1973. It was created by state lawmakers to:
      1. Assure that persons injured in auto accidents are compensated ...
          quickly and equitably ... for medical costs and lost income; and
      2. Limit lawsuits so that benefits could be paid quickly.

Under a no-fault system, accident victims are promptly compensated for their losses.  In Michigan, those injured in auto accidents receive unlimited medical benefits for their lifetime and substantial wage loss benefits on a "no-fault" basis.  Under Michigan's no-fault system severely injured people receive immediate benefits instead of the previous system of having to wait for lawsuits with at-fault parties to be settled.

People injured in Michigan auto crashes receive unlimited medical benefits for their lifetime.  No other state comes close to such high benefits.   In most other states, injured parties must filed lawsuits to obtain medical benefits.

Although Michigan has the highest level of benefits in the country, auto insurance average premiums rank 7th in the country.  However, the price of auto insurance in Michigan is driven by the cost of:
      1. offering unlimited medical benefits;
      2. inflation in the cost of health care and auto repair; and
      3. lawsuits.

What coverages are mandatory?

All drivers in Michigan are required by law to have three mandatory insurance coverages:

  • Personal Injury Protection
    Benefits are paid to the accident victim by his/her own insurance company.  These include the following:
    • All reasonable and necessary medical expenses.
    • Work loss benefits, up to a maximum of $5,452 per month (currently) for three years.  This is subject to annual cost-of-living adjustment.  Higher benefit limits may be purchased.
    • Up to $20 per day, for a maximum of three years for "replacement services."  This pays for services which the injured person can no longer perform.
    • Survivors' loss benefits and replacement services benefits are paid to the insured's dependents in case of death.
    • Funeral and burial expense benefits of a minimum of $1,750.
    Personal Injury Protection coverage applies to accidents occurring throughout the United States and Canada.  It covers you and your family while riding in any car and as pedestrians.  Premium costs for this coverage can be reduced by choosing a deductible for medical benefits - and a waiting period or deductible for work loss benefits.
  • Property Protection
    This provides coverage for damage caused by your car to property of others (except moving vehicles), regardless of fault.
    • Coverage is provided up to a $1,000,000 maximum.
    • Vehicles are excluded from coverage, unless properly parked.
    • Property Protection does not apply to accidents occurring outside the state of Michigan.
  • Residual Liability
    This provides protection if you are sued or are legally responsible:
    • In accidents involving death, serious impairment of body function, or permanent, serious disfigurement.
    • When actual economic losses sustained in an accident exceed the benefits available in Personal Injury Protection coverage.
    • In accidents occurring outside of Michigan, for property damage and bodily injury.
    The required limits of this coverage are $20,000 for one person's injury, $40,000 for all persons injured in one accident and $10,000 for property damage.  Higher limits may be purchased.

What coverages are optional?

Insurance companies also offer optional coverage as part of the no-fault insurance policy.  Collision insurance is available in three forms:

Standard: Pays for damage to your vehicle regardless of who is at fault
for an accident.  YOU always pay the deductible amount.
Broad: Pays for damage to your vehicle regardless of who is at fault
for an accident.  But if you were more than 50% at fault,
YOU pay the deductible amount.
Limited: Pays for damage to your vehicle ONLY if you were not more
than 50% at fault in an accident.  YOU always pay the
deductible amount.

Some other optional coverages are: Comprehensive, which pays for damage to your car resulting from causes other than collision, such as fire and theft; Uninsured Motorist, which pays what you would be legally entitled to collect for injuries caused by an uninsured driver; and Road Service, which pays for aid when your car is disabled.

About the Michigan Catastrophic Claims Association

MCCA stands for Michigan Catastrophic Claims Association.  It's a special fund set up by state law. Our no-fault insurance system provides unlimited medical benefits for people who are hurt in auto accidents.  So, a single injury can cost millions of dollars.  MCCA reimburses insurance companies for these large losses after they reach a certain threshold, currently at $545,000.  Then companies have to pay an assessment to cover what MCCA paid out for claims.  Finally, this cost is passed on to all policyholders.  In other words, the MCCA charge is your share of the cost for catastrophic injuries resulting from traffic accidents.  To find out more details about the Michigan Catastrophic Claims Association, including financial data, visit: www.michigancatastrophic.com

What is a mini-tort?

You can recover up to $1,000 for vehicle damage not covered by insurance.  You can sue the other driver if you were no more than 50% at fault in an accident.  If you were partially responsible for the accident, however, any court award in your favor would be reduced accordingly.  These lawsuits are handled in Small Claims Courts by the individual motorists involved.

Check with your insurance representative to see if you are protected against these suits. If not, coverage can be purchased.

Copyright 2010 by Insurance Institute of Michigan