Michigan auto insurance looks very different now than it did before July 2, 2020. Auto insurance reform or “no-fault reform” impacts every driver in the state, including you. However, the topic can also be very confusing.
Saginaw Bay Underwriters created this helpful series of posts entitled “Navigating Auto Insurance Reform” to make what you need to know clear, so you can make informed insurance decisions for you and your family.
In Part 5, we’ll use a claim example to look more closely at Bodily Injury (BI) liability and some things you may want to consider.
Bodily Injury Liability Claim Example
On your way to the grocery store, you run a stop sign and cause an accident with another vehicle. Unfortunately, the driver of the other vehicle is seriously injured and the accident is your fault.
After a lengthy hospital stay, the injured driver’s medical care ends up costing $1,000,000. Additional costs related to the accident include $100,000 to make home and auto modifications, and $250,000 for attendant care.
Maintaining Higher BI Liability Limits
You’ll recall that if you (or anyone covered by your auto insurance) injure someone else in an accident and are at fault, your own Bodily Injury (BI) liability provides coverage for damages you’re found to be responsible for.
Before July 2, 2020, if you injured someone in an auto accident, you could only be sued for pain and suffering. Now you have a much greater risk, as injured parties can sue for these additional items if they did not maintain unlimited Personal Injury Protection (PIP):
The following chart shows your potential liability, assuming the injured person in this scenario had selected the $250,000 PIP limit:
It should now be clear to see why you may want to consider maintaining higher BI liability limits.
In this scenario, even though some of the injured driver’s costs would be covered by his or her own PIP coverage, you could be sued for the remainder ($1,100,000), in addition to pain and suffering.
The higher your liability limit, the less potential you’d have for out-of-pocket costs.
You may also want to consider a personal umbrella policy, which provides additional coverage beyond your auto liability limits.
Understanding Uninsured/Underinsured Motorist Limits
Uninsured/underinsured motorist coverage applies if you are injured by another driver in an accident, and they have no insurance or not enough insurance to cover the damages they are found to be responsible for.
If you were the injured party in this scenario and the other driver was at fault, but had no insurance or not enough to cover the damages, your own insurance company would pay you the judgment that was awarded. For this reason, you may want to consider maintaining higher uninsured/underinsured limits.
In Michigan, as many as one in five drivers may be uninsured, making uninsured/underinsured motorist coverage (with higher limits) a necessary coverage.
Making the Complex Simple
Michigan auto insurance reform is a very important topic, but it can also be confusing.
In Part 6, we’ll move beyond PIP and BI liability to explain how the reform has affected other aspects of Michigan auto insurance.
For more information now, see “Michigan Auto Insurance Reform FAQ.”
Please subscribe to our blog to be notified of future posts. Call Saginaw Bay Underwriters at (989) 752-8600 if you’d like to speak with an advisor about your auto insurance.
Saginaw Bay Underwriters has made every attempt to ensure this information has been obtained from reliable sources. For specific language, please refer to your insurance policy, in addition to state statutes, laws and regulations. Current as of: August 2020.