It can be complicated to understand how each auto insurance coverage area would actually impact you in an auto accident, when you need it most.
Maybe you understand your current coverage but now you’re nervous about learning the changes involved with the new Michigan auto insurance law.
When reviewing your new insurance paperwork to decide what coverage options will work best for you, consider an important factor that impacts your choices but isn’t as clearly outlined as coverage limits and costs – Contributory Negligence. We’ll explain what this term means and how it relates to your coverage.
Overall, lower insurance coverage limits could be financially appealing, initially, but could also expose you to greater financial risk in the event of an auto accident.
Because litigation opportunities are now present even in minor at-fault accidents, it’s important for Michigan drivers to understand both the new Contributory Negligence law and Personal Injury Protection reform benefits.
Recent Changes with Michigan’s No-Fault Law
Previously Michigan’s No-Fault Law required drivers to have no-fault insurance. This coverage provided for unlimited medical benefits for the lifetime of the injured person when those injuries resulted from an auto accident, regardless of who was at fault.
These rules have recently changed with Michigan Auto Reform, which went into effect on July 2. When drivers renew their policies, they now have more options for the amount of auto insurance injury coverage they purchase. It is no longer strictly unlimited. Drivers are also now required to have more liability coverage. Learn more about how the changes could affect your policy and your premium here.
When deciding how to adjust your coverage under the new law, you’ll want to understand how your coverage protects you from future financial risks in the event of an accident.
What are the Risks if I Opt-Out of Unlimited Coverage?
No-fault insurance has been provided through unlimited Personal Injury Protection (PIP) coverage. Because drivers can now choose to lower their PIP coverage, they can also lower their premiums. However this comes with risks.
If you decide “NOT” to continue your unlimited PIP insurance, and you or someone else is injured in an auto accident, you lose unlimited coverage for expenses such as:
- Long term care; 24/7 if needed.
- Residential Treatment Programs.
- Home Modification may be limited.
- Auto Modifications will not be covered.
- Post-Acute Care/ Sub-Acute Rehabilitation.
- Rehabilitative costs.
- Damage you did to other people’s property.
Once your coverage runs out, you could be held responsible for personally paying these costs for your lifetime or the lifetime of someone else who was injured.
Instead of insurance covering these costs, regardless of who caused the auto accident, courts will now decide who is at fault and who owes damages.
Contributory Negligence and the Increased Chance of a Lawsuit
The percentage a driver causes or contributes to an accident is considered their Contributory Negligence. It means Michigan drivers can be found at fault and be sued for their contribution to an auto accident, under the new insurance reform.
If you’re fully at fault for an accident, you can be sued for all damages from the accident under the new law, including the injured person’s full medical bills and economic loss. This could add up to tens or even hundreds of thousands in unpaid medical bills.
The court system may find you responsible for costs including but not limited to:
- Lost Wages
- Medical Bills
- Long-Term Care
- Attorney Fees
- Home & Vehicle Modifications / Repairs
- Property Damages
- Attended Care
There may not be a limit or cap on these expenses.
For example, if you run into a vehicle that is waiting at a traffic light, you’re at fault under the State of Michigan’s rules. In this case, you can be sued for all damages under the new law.
As drivers may increasingly have lower coverage, they may be more likely to file a lawsuit against other drivers to cover their expenses in the event of an auto accident. We estimate that 20% of Michigan drivers have removed or significantly reduced their lifetime benefits under the new law. In Michigan 20.3% of drivers are uninsured.
This places more liability and risk on each individual Michigan driver. If your insurance doesn’t cover the needed expenses, and another driver files a lawsuit against you for further compensation, you may have to use personal financial assets to pay for the damages owed.
How Liability Coverage Limits can Prevent Lawsuits
Having high enough PIP coverage limits and liability coverage may help protect you from being sued by another driver in the event of an auto accident. Liability coverage has two components, Bodily Injury and Property Damage, which can also protect your personal finances. It’s important to understand what the limit you choose can cover.
The average personal auto liability insurance protection that Michigan drivers choose is $100,000 per person and $300,000 per accident.
For example, the hospital care for someone you injured in an auto accident can cost $38,000 per day. If they’re in the hospital for three days, the cost for their care can add up to $114,000. This means the average auto insurance liability limit of $100,000 per person is exhausted in just three days.
Be Mindful of Risks When Adjusting Your Coverage
Michigan auto reform presents many new changes to be aware of, and the new PIP coverage options are one of many.
When you renew your auto insurance, be mindful of how Michigan Auto-Reform affects your coverage. Reach out to your insurance provider to better understand how the changes could impact how you’re covered. From there you can make adjustments that allow you to protect your health and your finances.
At Frost & Remer we’re setting up virtual appointments via Zoom to consult with all of our clients.
Schedule a virtual appointment for a full risk assessment to make an informed decision about your coverage.