Insurance is one of those products that no one really likes to buy, everyone hates to pay for, and everyone is really glad they have when they need it. Auto insurance is mandatory by state law in virtually all fifty states, meaning that it’s something that people are forced to buy whether they need it or not.
In Michigan, however, there are special circumstances for auto insurance. Michigan is what is known as a no-fault state. This designation has huge impacts on the insurance market in the state and, consequently, on the citizens who have to pay for that insurance.
What Is No-fault Insurance?
When a person buys insurance in a no-fault state such as Michigan and gets into an auto accident, their medical coverage is paid for no matter who caused the accident. In states that are not no-fault, a certain degree of blame is calculated based on what happened, which determines who will get paid what and for how long.
In Michigan, however, it doesn’t matter who was at fault: The claims will get paid in a no-fault accident.
Michigan’s No-Fault Insurance System
Basic no-fault protection has three parts:
- Personal Injury Protection: This is the part of the policy that pays for your injury and hospitalization. It also pays for any lost wages as a result of your accident for up to three years.
- Property Protection: This part of your policy will pay up to $1 million in damages to other people’s property caused by your car in an accident. This is related to things like real estate, infrastructure, and other elements that are usually involved in crashes.
- Residual Liability Insurance: This part of a no-fault policy protects people from being sued in the event of an accident (except in special circumstances).
What Is Good About No-Fault Insurance?
The benefit here is that there is less involvement with the courts and lawyers when it is automatically determined that no one is at fault. This takes a lot of the guesswork and investigation out of the whole process because insurance will just pay out.
Another benefit is that drivers don’t have to worry about losing their homes, their businesses, their retirement accounts, or other personal property in the event that they are in an auto accident. If they get into an accident, they are protected by law from being sued by another motorist. For people who are technically at fault, this is a huge benefit.
Finally, people also don’t have to worry about medical expenses, which can quickly get high after a car accident. Of course, sometimes insurers are hesitant to pay for everything, even in a no-fault state. When this happens, a Detroit car crash lawyer can help.
What Is Bad About No-Fault Insurance?
Just like with any good idea, there is usually a double-edged sword waiting to slice. No-fault insurance is no different. When someone is hurt in an accident and has astronomical medical bills, there is no cap in Michigan on how much an insurance company has to pay out to take care of that person.
If someone breaks an arm, no big deal.But what if someone has a severe brain injury and requires round-the-clock care for decades or even for the rest of their lives? Those costs can add up to millions of dollars.
The other drawback about no-fault insurance is that the ecosystem overall is expensive to maintain. This translates to higher insurance rates for consumers. In fact, insurance customers in Michigan pay nearly twice what consumers in states pay who do not have no-fault insurance.
Overall, it is tough to differentiate among the benefits and drawbacks of no-fault insurance. Some people are able to stomach the high premiums in exchange for the peace of mind no-fault offers. Others who rarely make claims on their insurance feel they pay too much already for coverage that doesn’t fit their needs.