What is Michigan No Fault Car Insurance?
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Michigan has the highest car insurance rates in the country. But why is Michigan car insurance so expensive?
It all comes down to the state’s no-fault car insurance requirement. While 12 states require no-fault car insurance policies, Michigan is the only one that mandates unlimited Personal Injury Protection coverage. This law protects car-accident victims economically, but it also contributes to the state’s sky-high car insurance premiums.
In turn, car insurance law reform is underway in Michigan. To learn more about Michigan’s no-fault insurance and what changes are taking place, keep reading.
What Is Michigan No Fault Insurance?
As the name suggests, no-fault insurance coverage enables insured drivers to file a claim with their car insurance company, regardless of who caused the accident.
All drivers must purchase a no-fault insurance policy in Michigan. It’s the law. You won’t be able to get a license plate, register your vehicle, or drive legally without proof of coverage.
There are three parts to Michigan’s no-fault insurance:
#1 Personal Injury Protection (PIP) Insurance
Michigan law requires all drivers to purchase unlimited PIP coverage. These policies are notoriously costly, though they provide outstanding benefits to anyone who suffers a car accident injury.
Here are the economic losses covered by Michigan’s PIP insurance:
Medical bills – Any medical expenses that are directly related to an auto accident are covered for life with unlimited PIP. If a Michigan resident has health insurance, they must first max out the coverage from their health insurer. After that, the remainder of the expenses falls on their auto insurance provider.
Attendant care – If you require assistance after your accident for day-to-day tasks, you are entitled to these services. Daily living needs include eating, dressing, dispensing medication, and the like. Your auto insurer must pay the hourly wage of your attendant, as long as their care is prescribed by your doctor.
Household services – If you need help with your household chores after an accident, due to being too injured to do them yourself, your car insurer must foot the bill up to $20 a day. These eligible services include yard work, cooking, and cleaning.
Medical mileage – If your injury requires you to attend medical appointments on an ongoing basis, you can request compensation for the transportation expenses.
Wage loss reimbursement – If you can’t work due to your accident, you will receive up to 85% of your gross lost wages. These will be given to you tax-free for up to 3 years.
Funeral expenses – Lastly, if you or someone else dies from your car accident, your insurer will have to pay for the burial and funeral expenses.
As you can see, the economic compensation provided by PIP policies in Michigan is substantial. It costs car insurance companies a lot of money to provide these benefits. However, they ensure that a car accident can’t economically devastate your life, even if you get severely injured.
#2 Property Protection Insurance (PPI)
The second portion of Michigan’s no-fault insurance policy is PPI. This policy insures up to $1 million worth of damages caused by your car to another person’s property.
This property includes:
Properly parked vehicles
However, it excludes any damage to your car or the other vehicles involved in the accident.
#3 Residual Liability Insurance
The last portion of Michigan’s no-fault insurance is the Residual Liability Insurance policy, which includes both:
Bodily Injury Liability Insurance
Property Damage Liability Insurance
These policies protect you from getting sued after an auto accident. However, there are exceptions to this protection, including situations where you:
Cause an accident that kills someone, seriously injures them, or permanently disfigures them
Are involved in an accident with a non-Michigan resident who drove a vehicle that was not registered in Michigan
Are involved in an out-of-state accident
Are 50% or more at-fault for an accident that damages another person’s car beyond your liability coverage amount (in which case, you’re only liable for up to $1,000)
How Does Auto No Fault Michigan Insurance Work?
Something to keep in mind about no-fault insurance is that it covers the entire family of the policyholder, as long as they all live in one house.
Your no-fault policy also extends to anyone involved in your accident that doesn’t have a no-fault insurance policy of their own. This includes the other vehicle’s passengers, motorcyclists, and pedestrians.
The Advantages of Unlimited PIP Insurance
While Michigan’s unlimited PIP coverage increases annual premiums significantly, it can be an incredibly useful policy if you get into a major accident.
Here are some of its benefits:
#1 Speedy, Substantial Economic Reimbursement
Let’s say you get hit by another driver and end up with a severe injury. They flee town, and you can’t track them down.
With no-fault insurance, this isn’t a problem. You can simply file a claim with your own insurance provider. Regardless of your level of injury, you’ll be eligible for care under your unlimited PIP policy.
What’s more, you’re entitled to your economic benefits in a timely manner. If your auto insurer fails to deliver your benefits within 30 days, they will be charged a 12% penalty.
#2 Unlimited, Lifelong Benefits
In Michigan, your medical care is covered for life. Thus, if you need lifelong physical therapy to heal from your auto accident, you’ll get it. This reduces the financial stress of incurring a severe injury in an auto accident.
Even though you have to pay higher premiums each year, you’ll receive top-notch care that you may have never been able to afford otherwise.
#3 Very Few Location Restrictions
Finally, as a Michigan resident with no-fault insurance, you’ll receive PIP benefits even if the accident happens in:
Another U.S. territory
What Are the Average Michigan Car Insurance Rates?
To enjoy such comprehensive coverage, Michigan residents pay a lot for their annual car insurance premiums. In fact, Michigan’s car insurance rates have been the most expensive nationwide for 5 years in a row!
The average cost of Michigan car insurance is $2,331 per year, which is significantly higher than the national average of $1,427. Some Michigan cities have average car insurance rates as high as $13,404 a year!
As you can imagine, many residents can’t afford these premiums. As a result, over 20% of Michigan drivers are uninsured.
Why is Michigan Car Insurance So Expensive?
In addition to the high costs of unlimited PIP coverage, Michigan’s car insurance is expensive for the following reasons:
Increasing litigation costs – Even though the point of no-fault insurance was to reduce litigation, personal injury lawsuits have risen 130% between 2007 and 2017. Most of these lawsuits include Michigan drivers and their auto insurance company disputing a no-fault insurance claim.
Medical providers charge higher rates to auto insurers – Health insurance companies typically get discounted rates from medical providers, whereas auto insurance companies are charged in full. Thus, Medicare might pay $484 for a lower back MRI, while a car insurance company will be charged $3,279.
High rates of car insurance fraud – Since Michigan’s no-fault insurance is so comprehensive, it’s a magnet for fraudulent claims. Nearly 10% of all no-fault claims are believed to be fraudulent. Since auto insurers must pay benefits in a “timely manner,” they don’t have enough time to investigate and verify the validity of each claim.
When Will Michigan Car Insurance Go Down?
So when will Michigan car insurance go down? Due to these pricy problems, Michigan leaders have made the following changes to the auto insurance laws. These changes took effect on July 2, 2020:
Unlimited PIP will now be optional – Michigan residents can choose their desired level of PIP coverage, rather than being forced to purchase an unlimited amount.
Increasing liability coverage – Liability minimums will increase significantly, going from $20,000 per person to $250,000 per person, and $40,000 per accident to $500,000 per accident
Auto insurance billing caps for medical providers – To make medical care more affordable for car insurance companies, medical providers can no longer charge car insurance companies so much. They must cap their rates. They can only charge auto insurers around 200% of what they charge Medicare, starting in 2021.
Removing personal factors from premium determination – Michigan car insurance companies will no longer be able to consider gender, marital status, occupation, education, zip code, credit score, and residential status when they determine an individual’s premium.
More fraud investigation – A fraud investigation unit has been created to tackle the high rates of car insurance fraud.
These are just a few of the changes taking place in Michigan car insurance law. The reform as a whole should reduce the average cost of car insurance by 16.5%.
Online Auto Insurance: Find the Perfect Auto Insurer for You in Michigan
Michigan’s no-fault Insurance has historically offered residents extensive medical care and economic reimbursements. However, these comprehensive perks have come at a high cost.
Not every Michigan driver can afford this level of coverage, and with recent reforms, they’ll no longer be forced to.
To find a Michigan auto insurance company that can provide your ideal amount of coverage at a great rate, try Online Auto Insurance’s rate finder. You can find free quotes and compare cheap Michigan insurance options in minutes.
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