In Michigan, our auto insurance laws are governed by the No-Fault Act. In a traditional tort law state, an insured would look to the at fault driver for payment of many of the expenses associated with your involvement in an auto accident. In our system, unlike the traditional system, each insured must purchase their own coverage to cover such things as medical expenses and wage loss in the event of an auto accident. There are minimums on the amount of coverage that must be carried as well as maximums to the amounts that are recoverable.
The fact that we have no-fault auto insurance in the State of Michigan does not mean that if somebody else is at fault in an accident, they are “off the hook.” It simply means, that for certain benefits (that are explained on this page), a person must look first to their own insurance coverage. Let’s explore some of the most important types of insurance coverage that are typical in a Michigan no-fault auto insurance policy. It may be helpful to have your declarations page of your auto insurance policy handy while scrolling through this material.
Types of Coverage
I. Wage Loss
Every no-fault auto policy is required to provide wage loss coverage in case you are injured in an auto accident and are unable to work. Your insurance company is required to pay for this benefit for a maximum of 3 years after the accident. Also, the amount of wage loss recovery is reduced by 15% for taxes and is limited to a monthly maximum. If your income exceeds the monthly maximum, you may wish to consider additional wage loss coverage to make up the difference in case of a disabling injury.
II. Medical Expenses
Regardless of fault, your auto insurance policy must provide coverage for all reasonable and necessary medical expenses incurred as a result of an auto accident. You are also entitled to reimbursement for medical mileage to and from your health providers. One key item within this type of coverage deals with whether you carry a coordinated health care clause in your auto policy (very likely). A coordinated auto insurance policy makes other accident and health coverage primarily responsible for your medical expenses relating to an auto accident. The auto insurer will then pick up medical expenses that your health care insurer won’t cover. Generally, it is a much better idea to carry an uncoordinated auto policy. With an uncoordinated auto policy, your auto carrier is the primary insurer regardless of the availability of other health insurance. The benefits of carrying an uncoordinated auto policy are too numerous to mention here. Suffice it to say that many people have to sue their own auto insurance company because they carried a coordinated health coverage clause in their auto policy.
III. Replacement Services
Your no-fault auto insurance policy entitles you to recover up to $20 per day for services that you no longer can do because of the accident (3 years from date of accident is the maximum). Replacement services commonly include household tasks, lawn care, babysitting, grocery shopping, etc. These services must be “reasonably incurred” because of the accident to be recoverable.
IV. Bodily Injury Liability
Michigan requires every auto insurance policy to provide liability coverage in case you are at fault (or partially at fault) in an accident that causes death, disfigurement, or serious impairment of a body function. The minimum coverage required to be carried is $20,000 per person and $40,000 per occurrence. If you are carrying the minimum insurance coverage, you are probably extremely at risk. A typical automobile accident can run into the hundreds of thousands of dollars in damages. Carrying the bare minimum exposes your personal assets to a lawsuit.
V. Uninsured Motorist Coverage
Even though every vehicle in Michigan is required to carry the minimum amounts of bodily injury liability insurance, many people simply ignore the law. If you are injured by one of these motorists, uninsured motorist coverage may provide a right to recover from your own insurance carrier. This coverage is optional coverage in Michigan. However, it is often included in a typical no-fault policy in the amounts of $20,000 per person and $40,000 per occurrence. If you are carrying the minimum amounts, you are probably extremely at risk. Check your policy. It is inexpensive to add greater amounts of coverage.
VI. Underinsured Motorist Coverage
Underinsured motorist coverage is optional coverage to protect you in case the at-fault driver doesn’t carry enough bodily injury liability coverage to adequately compensate you for your injuries. Check your policy and talk to your agent. If it is available to you, I strongly recommend you carry this type of coverage.
Our Recommendations For Your Michigan No-Fault Auto Insurance Coverage:
Wage Loss -Consider purchasing extra wage loss coverage if you earn more than the statutory maximum that is recoverable per month ($4,929). If you earn significantly more than the statutory maximum, extra wage loss is a must. If you earn less than the statutory maximum, you should be okay with regards to wage loss coverage. If you are retired and don’t rely on wages or salary, ask your insurer about a waiver of wage loss coverage.
Check your policy for a coordination clause. If you carry coordinated medical coverage on your auto policy, we suggest changing it to uncoordinated. Although your insurance premium will be higher, the troubles you will save yourself later justify the increase.
Bodily Injury Liability
If you carry only the minimum ($20,000 per person/$40,000 per occurrence), we suggest you increase your coverage. We suggest that everyone carry at least $100,000 in coverage. If you have a home and other assets, you should carry at least $300,000 in coverage. If you have significant assets or are a high wage earner we suggest at least $500,000 of coverage or more. If you have anything to lose, carry higher limits. This is one area that you do not want to be unprotected.
Uninsured Motorist Coverage
Even though this is optional coverage, we highly recommend that you carry this type of coverage. Do not just accept the standard package that most insurers sell of $20,000 per person and $40,000 per occurrence. Everyone should carry at least $100,000 of UM coverage. We recommend carrying $300,000 of UM coverage if you are a middle income earner. The added benefit outweighs the slight cost of increased premiums. This coverage is extremely inexpensive compared to other types of insurance coverage.
Underinsured Motorist Coverage
This is optional coverage as well but is extremely important. This type of coverage is also extremely inexpensive. Again we recommend everyone carrying at least $100,000 in UIM coverage. $300,000-$500,000 of coverage is preferred for middle income earners.