What it Means to Live in a ‘No-Fault’ State

Often when I hear insurance being discussed amongst others or on the news in Michigan, I no doubt will hear the phrase ‘No-Fault’ at some point throughout the dialogue, generally with a tone of negativity. But what really is ‘No-Fault’? What does it mean to us, the drivers and consumers, in a ‘No-Fault’ insurance state? Does anyone really know? Well I do, and I’m here to answer those questions and clear up some of the apparent confusion people may have with ‘No-Fault’ insurance.

Firstly, I want to explain that all ‘No-Fault’ really means is that everyone claims their own damages under their own policy. Your insurance policy is responsible for the repairs to your insured vehicles as well any injuries to you or members of your household as the result of an accident. Everything on your policy covers YOU, not the other driver. There are a couple exceptions to this rule and I will explain those a little further into this article.

Next, I’d like to discuss what coverage is required by law for those of us in a ‘No-Fault’ state, specificially Michigan, to carry. At the very least, when purchasing an auto insurance policy, you must have Liability (both Bodily Injury and Personal Property) and Personal Injury Protection. The Bodily Injury portion of Liability is what protects you if someone choses to sue you for “pain and suffering” as the result of an auto accident and Personal Property pays for any property, such as buildings, signs, etc., that you may have damaged in an auto accident. While the state minimum liability limits are a split limit of $20,000/$40,000 (per person/per occurrence), due to the litigious society we live in now, I always recommend a single limit of at least $300,000. Personal Injury Protection, or PIP, is your medical coverage for auto related injurues. Now you may be saying to yourself, “I don’t need medical coverage, I have my own health insurance.” Whether you do or don’t, it doesn’t matter, you are required by law in Michigan to have this coverage. Also, since there is unlimited medical coverage under PIP, many health insurance companies have begun excluding coverage for auto related injuries so whether you do or don’t have health insurance is most times irrelevant. You can call the number on the back of your health insurance card to find out if your plan covers auto related injuries or not. Keep in mind, Medicare and Medicaid do not cover auto related injuries.

So now that I’ve described the required coverages in Michigan, I’d like to briefly touch base on the “optional” coverages. There are additional Liability coverages available called Uninsured and Underinsured Motorists coverage. This is liability coverage that you benefit from if you are involved in an accident with a driver that either has no insurance or has very low limits of liability. So if you are looking to claim “pain and suffering” against a person who is not adequately insured, you can claim this under your own policy. Even though Uninsured/Underinsured Motorist coverage is not required by law, it is a very important and very inexpensive coverage that I feel everyone must have. If it is not on your policy, I highly encourage everyone to call your insurance company/agent and add it on today.

Last of course is the Physical Damage coverage on your policy. While having coverage for damages to your vehicle is not required by law, it is a requirement if you have a lease or lien on your vehicle. This coverage, however, is where ‘No-Fault’ largely comes in to play. When you’re in an accident, your insurance policy will pay to have your vehicle fixed, less your deductible if applicable. Even though Michigan is a ‘No-Fault’ state, there will always be an “at-fault” party in every accident. The person who is “at-fault” in an accident will see higher insurance premiums after filing the claim and will always pay their deductible if there is one. The “not-at-fault” party will see less of an increase, or none depending their policy, and may either have their deductible waived or be reimbursed.

Which now brings me back to the “exceptions to the rule” I brought up earlier. As I previously stated, you file a claim under your insurance policy for damages to your vehicle. However, if you are the “not-at-fault” party in an accident, under the Michigan Mini-Tort law, you can collect up to $1,000 from the “at-fault” party’s insurance to go toward your deductible. You can also collect this from the “at-fault” party even if you don’t have full coverage on your vehicle. For instance, if you carry “liability only” on your vehicle and someone hits you while you’re driving, you can file a claim against their policy to cover up to $1,000 toward your damages. There is one other exception and it has to do with coverage while your vehicle is parked and unoccupied. If your vehicle is legally parked and uncoccupied and someone hits it, you can file what’s called a “Property Damage” claim under the person who hit your car’s policy. This claim will pay for all of your damages, a rental vehicle, and towing costs with no deductible and no penalty to you. The only catch here is, you need to actually know who hit your vehicle, and since most people drive off after hitting someone else’s car, rarely does someone get to benefit from this type of claim. But the coverage is there, and for the lucky few who have been fortunate to witness the person hitting their vehicle or had someone leave them a note with their information, it has definitely been beneficial.

So to wrap things up, do not just take your insurance policy for face value and never be afraid to ask questions. You never know what kind of valuable coverages may be lurking in the interworkings of your insurance policy.

Meredith Ferry, Account Sales Executive