What is full coverage insurance in Michigan?

Michigan’s auto insurance reform law allows drivers to opt out of buying unlimited personal injury protection (PIP), but they need higher liability limits. Michigan’s auto insurance reform law changed the state’s car insurance requirements for policies issued or renewed after July 2020. Michigan’s insurance reform also decreased the Michigan Catastrophic Claims Association (MCCA) fee, which drivers must pay if they purchase unlimited PIP insurance.… read full answer

Michigan Auto Insurance Reforms After July 2020

1. Drivers need $250,000 in personal injury protection per person, with lower limits or exclusions allowed for drivers with Medicare, Medicaid, or qualified health care.
2. Insurers must offer an optional supplement to PIP insurance that covers attendant care, such as home nursing.
3. Drivers need $50,000 in bodily injury liability coverage per person ($100,000 per accident), plus $10,000 in property damage liability coverage for accidents outside the state.
4. Insurers must offer $3,000 in limited property damage liability insurance, which applies if you are 50% or more at fault in an accident and the other driver sues you for vehicle damage.

Michigan has some of the most expensive car insurance premiums in the country, as well as high fraud rates. To combat this, Michigan’s auto insurance reform law implemented several new consumer protections.

Consumer Protections Created by Michigan’s Auto Insurance Reform Law

• Insurance companies can no longer consider gender, home ownership, marital status, credit score, educational level, occupation, and ZIP code when determining rates.
• Drivers cannot be penalized for a lapse in auto insurance coverage as long as they apply for insurance by January 1, 2022.
• Michigan insurers must reduce PIP premiums, and all premiums need to be approved by the Department of Insurance and Financial Services.
• A new fraud investigation unit was formed.
• Fees and penalties for insurance companies who violate laws increased.

To learn more, check out WalletHub’s guide to Michigan’s car insurance requirements.

Drivers in Michigan need $50,000 of bodily injury liability insurance per person (up to $100,000 per accident) and $10,000 of property damage liability insurance. Michigan also requires personal injury protection (PIP) insurance. PIP covers medical expenses for you and your passengers after an accident.

Here’s How Much Car Insurance Drivers Need in Michigan:… read full answer

If you lease or finance your car, you may be required to carry coverage types that are not mandatory under Michigan law. Lenders usually require comprehensive and collision insurance. Collision insurance covers repairs to your car when you hit another car or object. If the damage to your vehicle was caused by something other than a collision—like a natural disaster, vandalism, falling objects, or animals—it is most likely covered by comprehensive insurance. Lenders may also require gap insurance, which covers the difference between what you owe on your loan or lease and what the vehicle was worth if it gets stolen or totaled.

Even if you’re not required to carry these optional coverage types, you may still need them. To learn more, check out WalletHub’s guides to dropping optional coverages and the penalties for driving without insurance in Michigan.

You should drop full coverage insurance on your car when the cost of the insurance equals or exceeds the potential payout, should a covered event occur. You may also want to drop full coverage if you are willing to pay for repairs out of pocket, or if you would prefer to replace your vehicle if it’s damaged. … read full answer

For example, an older car with high mileage may not be worth costly repairs, and you might want to save for a new car instead of paying for extra insurance. Similarly, a driver who uses their car infrequently might take the gamble of dropping full coverage, since they are statistically less likely to damage their vehicle.

You should consider dropping full coverage car insurance when...

• Your car is old or has a lot of miles. The less valuable your car is, the less likely it is that you need much coverage beyond your state’s requirements. A good rule of thumb is that when your annual full-coverage payment equals 10% of your car’s value, it’s time to drop the coverage.
• You have a big emergency fund. If you don’t have any savings, car damage might leave you in a severe bind. In that case, the money you spend on full coverage insurance will protect you from insurmountable repair bills. Consider keeping your full coverage insurance until you have some savings built up.

For those who aren’t quite sure what it means exactly, “full coverage” is a catch-all term for insurance that covers you, other drivers, and your vehicles. It generally includes both collision and non-collision insurance. In other words, there is no single policy for "full coverage" car insurance. Instead, you select a combination of coverages that you feel is enough to handle all aspects of a car collision. With a well-rounded collection of coverages, you are “fully” protected from a variety of vehicular hazards, ranging from injuries and collision damage to weather events, encounters with wildlife, and vandalism.

However, it’s important to remember that different states require different levels of coverage. Make sure to check state requirements before making any changes to an insurance policy.

With that being said, it’s wise to get full coverage for a new, rare, or expensive car. A $40,000 truck is worth the few hundred dollars a year for full coverage insurance, for example. Otherwise, you run the risk of having to drop another $40,000 on a new truck if you’re involved in a serious accident.