Everything You Need to Know About Deductibles, Liability, and No-Fault Coverage in Michigan
Navigating your auto insurance policy can be confusing, especially with unique requirements like Michigan’s no-fault system. This guide explains common car insurance terms in plain language, helping you understand your coverage options, including deductibles, liability, and Personal Injury Protection (PIP) in Michigan.
Deductible: Your Share of the Cost
A deductible is the amount you pay out-of-pocket on a claim before your insurance company starts to pay. For example, if you have a $1,000 deductible for collision repairs and the total damage is $2,500, you pay the first $1,000, and your insurance covers the remaining $1,500.
Bodily Injury Liability Coverage in Michigan
In Michigan, Bodily Injury (BI) liability insurance is also known as “residual liability” coverage. It covers the costs of injuries you cause to other people in an accident. While Michigan is a no-fault state, this coverage is essential because you can still be sued in certain situations.
Michigan’s No-Fault System and BI Liability
- No-Fault vs. At-Fault: Under Michigan’s no-fault law, your own insurance’s Personal Injury Protection (PIP) typically pays for your medical bills and lost wages, regardless of who caused the accident. The no-fault system aims to limit lawsuits for minor injuries.
- When You Can Be Sued: Your BI liability coverage kicks in to protect you when someone files a lawsuit against you after an accident involving serious injuries.
- BI Coverage Pays For:
- Pain and suffering compensation.
- Excess medical bills that exceed the at-fault driver’s own PIP coverage.
- Excess lost wages for the injured party.
Understanding BI Coverage Limits
Your policy will show BI limits as two numbers, such as $250,000/$500,000:
- $250,000 per person: The maximum amount your insurance will pay for one person’s injuries.
- $500,000 per accident: The maximum total amount your insurance will pay for all injuries in a single accident.
- Michigan Law Changes (2020): Following Michigan law changes in 2020, drivers can select their BI limits, with $250,000/$500,000 being the default. You can choose lower limits, but many experts recommend higher coverage for better financial protection.
Uninsured/Underinsured Motorist (UM/UIM) Coverage
This vital coverage protects you and your passengers if you’re in an accident with a driver who is either uninsured (has no insurance) or underinsured (doesn’t have enough insurance to cover your costs). Your UM/UIM coverage can help pay for:
- Your medical expenses
- Lost wages
- Pain and suffering, depending on your policy
Personal Injury Protection (PIP) in Michigan
As part of Michigan’s no-fault system, PIP coverage pays for your medical expenses and lost wages if you are injured in a car accident, regardless of who was at fault.
- PIP Covers:
- Medical care (doctor visits, hospital stays, physical therapy)
- Lost wages (up to 85% of your income for up to three years)
- Household replacement services
- Funeral expenses
- PIP Medical Coverage Options (since 2020): Michigan drivers can now choose different levels of PIP medical coverage, including:
- Unlimited coverage
- $500,000 per person
- $250,000 per person
- $50,000 per person (if on Medicaid)
- An opt-out option (if you have qualifying health insurance).
Comprehensive Coverage
Comprehensive coverage protects your vehicle from damage caused by events other than collisions with other cars or objects. This includes:
- Theft
- Vandalism
- Hail or weather damage
- Hitting an animal, such as a deer
- Damage from falling objects, like a tree branch
- Glass and windshield damage from flying objects
Collision Coverage Types
Collision coverage pays for damage to your own vehicle after an accident. How your deductible is applied depends on the type of collision coverage you have.
- Broadform Collision: Your deductible is waived if you are not at fault for the accident. If you are at fault, you pay the deductible.
- Standard Collision: You must pay your deductible regardless of who is at fault.
- Liability Only: This is the minimum required insurance. It does not provide any coverage for damage to your own vehicle.
Frequently Asked Questions about Michigan Auto Insurance
Q: What is a deductible in auto insurance?
A: A deductible is the amount you agree to pay yourself on a claim before your insurance company pays the rest. Choosing a higher deductible can lower your premium.
Q: Does Michigan’s no-fault system mean I can’t be sued?
A: No, that’s a common misconception. While your own PIP covers initial medical costs, you can still be sued for injuries, death, medical bills, pain and suffering, loss of wages, disfigurement and more. Your Bodily Injury (BI) liability coverage protects you in these situations.
Q: Why do I need Uninsured/Underinsured Motorist coverage in Michigan?
A: Even though Michigan has a no-fault system, many drivers are uninsured or very underinsured. This coverage protects you by paying for your damages if the at-fault driver has no insurance or not enough coverage to cover your costs. This would only be paid if you were to sue the other driver for damages.
Q: What is the difference between Comprehensive and Collision coverage?
A: Comprehensive covers damage from non-collision events (like theft, hail, or hitting a deer), while Collision covers damage from hitting another vehicle or object.
Q: What is PIP in Michigan auto insurance?
A: PIP, or Personal Injury Protection, is mandatory no-fault coverage in Michigan. It pays for your medical expenses, lost wages, and other services if you are injured in a car accident, regardless of who is at fault.