Michigan's No-Fault Auto Insurance Law For Auto Accidents

  No-fault is another type of auto insurance that some states require you to purchase, in order to register for a license plate. Michigan is one of “12 no-fault states” (Zevnik, Richard The Complete Book of Insurance). Everyone who lives and drives in Michigan is required to purchase no-fault insurance. No one is allowed to drive any vehicle without purchasing no-fault auto insurance for that vehicle. All the other 38 states are at-fault states. At-fault means that whoever is at fault pays for the damages.

  What is no-fault insurance? It is a type of insurance that was created to (a) limit the number of lawsuits from small and not very serious auto accidents and (b) it is intended to spread the damages from the auto accident over both drivers, no matter who is to blame for the accident. No-fault insurance has successfully limited the number of lawsuits over auto accidents and has succeeded in keeping insurance costs to a minimum over the 30-some years it has been in place for Michigan.

The basic no-fault auto insurance policy required in the state of Michigan covers 100% of your medical bills, 85% of your lost income up to $4929 each month, and it will cover damage to others' property, such as buildings, mailboxes, and fences (not damage to cars). This is for up to 3 years from the accident date. This is what you are absolutely required to purchase to get a license plate and driver's license. Besides covering your own lost wages, it will provide your family with up to $4929 a month for up to 3 years, if you are the main wage earner and are killed in an auto accident. No-fault insurance will also pay up to $1 million for damage incurred to others' property by your car. This is not for car repair! For example, say you slide off the road, flip over several times, and hit a mailbox, flowers, fence, and shed along the way. No-fault would reimburse the owner for repair or replacement for the items.

No-fault also helps keep you from being sued from having been in an auto accident, except for the following special circumstances: (1) if you kill, permanently injure or disfigure the other person, (2) if the auto accident is with someone visiting Michigan, who does not live there and whose vehicle is registered outside of Michigan, (3) if the accident is in another state, or (4) if you are found to be more than 50% liable for an auto accident, in which the other driver's car 's damages are not paid for by insurance. If any of these four circumstances occur, you can find yourself in a possible lawsuit situation. But these are unusual circumstances, and you won't find yourself there very often. Ironically, the limitations that no-fault insurance places on auto accidents are similar to the laws that Indiana (and some other states) has in place for suing medical practitioners.

No-fault insurance makes each driver responsible for the damages to his or her own car. This is the main difference between at-fault and no-fault insurance. A separate rider must be added to your auto insurance which is called collision and comprehension. The collision portion covers any damage to your car, when you have been in an auto accident. Just like with at-fault insurance, there is still a deductible you must pay before the auto insurance company pays their portion. Just make sure it's a deductible amount you can afford to pay, or save up that amount of money and keep it in a savings account where we can have quick access to it. Obviously, the higher deductible you can pay, the lower your insurance premiums will be . Comprehension covers replacement of your car if it is stolen, repairs it if you hit an animal, or are damaged in a natural disaster.

Another insurance rider you may want to add to your no-fault insurance is called residual liability insurance. This increases the amount of money available that can be paid out, should you be sued. It reduces the bills you may face beyond what your insurance company may pay. This is a type of another insurance policy, often called umbrella insurance. Umbrella insurance covers you in certain cases when you may be required to pay out money beyond what your regular auto or other insurance would cover. Generally, this will only occur when you are being sued by another party. This rider can be attached to your no-fault insurance policy, or it can be purchased as a separate umbrella insurance policy. Talk to your insurance agent for more details.

No-fault insurance is just one more type of auto insurance. It is not better or worse than at-fault auto insurance, just different. It was created to limit the number of lawsuits and to distribute the damages as fairly as possible to all parties involved. For the state of Michigan, it has been a success. For more information, see the official document put out by the Michigan government: http://www.michigan.gov/documents/cis_ofis_ip202_25083_7.pdf.