Automobile Insurance 15% Flashcards
Michigan Minimum Insurance Requirements
● Personal Injury Protection (PIP)
● Property Protection (PPI)
● Residual Bodily Injury and Property Damage Liability (BI/PD) coverage
Minimum liability limits
Split limits of 50/100/10
● $50,000 per accident for one person injured or killed
● $100,000 per accident for two or more people injured or killed
● $10,000 per accident for property damage to others
limits differ for drivers who work for a transportation network company (TNC)
● Single limit of $1,000,000 while picking up and transporting passenger
● Split limits of 50/100/25 while waiting for passenger’s ride request
Proof of Insurance
● Must include the names of people on the policy
● Must be kept in car or on a device, available to be viewed upon request
Presenting false information for proof of insurance is a
misdemeanor
○ up to 1 year in prison, and/or
○ $1,000 fine
Failing to provide proof of insurance is a
civil infraction
○ appear before court, and/or
○ license suspension
Michigan Automobile Insurance Placement Facility (500.3301)
● Residual market for MI auto insurance
● Provides insurance for high-risk individuals
● Encourages private insurance for policyholders who can qualify for it
No-Fault Automobile Coverage (500.3101)
Michigan law requires all owners of motor vehicles registered in the state to carry
no-fault insurance. This includes three primary coverages:
- Personal Injury Protection (PIP)
- Property protection insurance (PPI)
- Residual Liability Insurance (Bodily injury and property damage - BI/PD)
(PIP)
Personal Injury Protection
(PPI)
Property Protection Insurance
(Bodily Injury and Property Damage - BI/PD)
Residual Liability Insurance
Personal Injury Protection (PIP)
Covers medical expenses and certain other costs related to injuries sustained in an accident.
Before:
PIP coverage was unlimited in Michigan. PIP also paid for:
● Funeral expenses between $1,750 and $5,000 (depending on the policy)
● 85%of lost income for up to 3 years
○ these benefits expire if the injured person dies before the 3 years are up
○ note: if the insured is over 60, and would not be eligible for work loss benefits, he may waive this coverage in exchange for a lower premium
● Up to $20 per day (for up to 3 years) for the reasonable cost of miscellaneous services that the injured person would have done himself, for no pay, but which he can no longer perform because of the injury (e.g. cooking meals, cleaning,
running errands, etc.
After:
Michigan policyholders can choose from the following coverage options:
● Unlimited PIP coverage (this is the default option, and provides the same coverage that a policy issued before July 2020 would have provided; but policyholders can choose a lower limit)
● $500,000 limit
● $250,000 limit
● $50,000 limit (only available for drivers who are on Medicaid)
● Opt-out of PIP coverage (only for people who have qualified health insurance
for themselves and all relatives who live with them)
Funeral benefits remain the same, except for those who opt out of PIP.
Property Protection Insurance (PPI)
is a mandatory component of Michigan’s no-fault auto insurance system. It provides coverage for property damage caused by a motor vehicle, with specific limitations and conditions.
PPI covers up to
$1 million per accident for damages your vehicle causes to another person’s stationary property.
Examples include:
Buildings (e.g., homes, garages).
Fences.
Poles.
Parked vehicles.
Government Property:
Includes damages to public property such as roads, bridges, traffic signs, and other infrastructure.
PPI does not cover
damage to other moving vehicles. For example:
In a collision between two moving vehicles, your PPI coverage does not apply.
Damage to your own vehicle is covered under optional collision/comprehensive coverage, not PPI.
Residual Liability Coverage
In general, no-fault insurance protects the policyholder from being sued when he causes damage. However, there are certain cases where an injured person is allowed to sue the insured. This can happen if the insured:
● Causes an accident in which someone is killed or seriously injured
● Is involved in an accident in a different state or with someone who lives in a different state
Before:
A driver’s residual liability coverage must have limits of at least
20/40/10:
● $20,000 for bodily injury or death to one person per accident
● $40,000 for bodily injury or death to two or more persons in one accident
● $10,000 for damage or destruction of property of others per accident
After:
Drivers must have coverage of at least
50/100/10:
● $50,000 for bodily injury or death to one person per accident
● $100,000 for bodily injury or death to two or more persons in one accident
● $10,000 for damage or destruction of property of others per accident
Drivers will automatically be offered coverage of $250,000/$500,000, but can choose
lower limits if they sign a form.
What is Uninsured/Underinsured Motorist (Reg 500.1502) in Michigan?
optional insurance coverages that protect you if you are involved in an accident with a driver who either lacks adequate insurance or has no insurance at all.
Uninsured/Underinsured Motorist – pays for
injuries to an insured person caused by someone who does not have the liability coverage to pay for them
Collision – pays for
damages to your vehicle after a collision with another vehicle or an inanimate object
Comprehensive – pays for
damages to your vehicle that are caused by
something other than a car accident, such as fire, vandalism, animals, theft,
etc.
Note: since most injuries in MI fall under no-fault coverage,
UM/UIM would only kick in
in extreme cases, when a person’s no-fault coverage is not enough
Stacking
if you have UM/UIM coverage for more than one car, or on
more than one policy, stacking would allow you to combine those available coverages to cover losses, if needed.
Policy holders may NOT stack UM/UIM coverage in MI.
After market Parts
On a repair estimate, the insurer must clearly list any replacement parts not made by original manufacturer
Cancellation
Insurer must notify insured of cancellation:
● 10 days in advance for nonpayment of
premiums
● 30 days in advance for any other reason
(PAP)
Personal Auto Policy
The Personal Auto Policy (PAP)
A policy that combines liability insurance with other optional coverages
PAP policies can cover:
● Individuals and residing family members
● People driving car with owner’s permission
● Four-wheeled vehicles under 10,000 lb
Remember: insurable interest is required (i.e. auto owners, lessors, or lenders).
What is covered? (PAP)
● Property damage
● Bodily injury
● Legal defense
Insurer must defend policyholder against liability claims, in or out of court.
PAPs will not pay
punitive damages.
PAP Example
If Junior takes the family car out for a joyride, hits the mayor’s car, and is sued, your PAP will cover the car repairs and any injuries the mayor may have, but it will not pay any punitive damages a judge might assign to teach him a lesson.
PAP Sections
● Declarations Page
● Six Sections:
1.Part A Liability
2.Part B Medical Payments
3. Part C Uninsured Motorist
4. Part D Coverage for Damage to Your Auto
5. Part E Duties After an Accident or Loss
6. Part F General Provisions
● Endorsements
- Part A
Liability
- Part B
Medical Payments
- Part C
Uninsured Motorist
- Part D
Coverage for Damage to Your Auto
- Part E
Duties After an Accident or Loss
- Part F
General Provisions
Declarations Page
● Named insured’s name and address
● Policy period
● Applicable insurance coverages and their limits
● Deductible
● “Loss payees” (all parties to be indemnified when losses occur)
● Make, model, and VIN of insured automobiles
● Endorsements added to the policy
If Eduardo buys a car with the help of an auto loan, the bank that financed his loan
may require that he add it as a loss payee on his auto policy. This ensures that the
bank can recover its investment in the vehicle if Eduardo wrecks it
Auto Insurance Deductibles:
● Fixed: one specific, predetermined amount
● Per Claim Basis: insured is responsible for paying this amount on every claim
Note: Deductibles typically only apply to Collision and Comprehensive coverages, not Liability.
Owned
A car that the insured owns or has leased for 6 months
The Use Of
Any activity involving the car
Occupying
Being in or on a vehicle, getting in or out, getting on or off, sitting on, or leaning
against the vehicle
Bodily Injury
Bodily harm, sickness, or disease, or the resulting death
● Does not include mental distress or psychological trauma
Property Damage
Destruction of, or physical damage to, tangible property
● Includes the loss of use of damaged property
Your Covered Auto:
- The car specified on declarations page
- A newly acquired auto
- A trailer that the insured owns
- A temporary substitute for car or trailer listed on dec page, due to:
a. breakdown
b. repair
c. servicing
d. loss
e. destruction
Newly Acquired Auto
Any new or used vehicle that the insured gets during the current policy period
● Must weigh less than 10,000 lbs
● May not be covered under another insurance policy.
● May not be used for the transport of goods and materials (with some
exceptions)
● Automatically gets the broadest coverage provided to any one car listed in
policy
Adding Newly Acquired Autos
Insured has 14 days to report newly acquired auto
However: most states and insurers actually require that you report any new auto
within
10 to 30 days.
Comprehensive and Collision coverage:
● Can be added within 4 days of getting new car
● Automatically applies for first 4 days with $500 deductible
Note: These grace periods can vary by insurer
Part A– Liability Coverage
● Not for insured’s own injuries or damages
● Covers the insured’s liability for the injuries or property damage of others
● Defense in court is included, if necessary
Insuring Agreement
Establishes what the insurer will do for the insured if the insured becomes liable for losses
Insuring Agreement, If the insured becomes liable will cover:
● Pay liability costs, up to policy limits
● Covers injury or damage caused by “your covered auto” or any car the insured drives with permission
● Settle or defend liability lawsuits
● Insurer reserves the right to settle liability cases out of court
Covered Person:
- The named insured and family members living in the same household
- Someone using covered auto with permission
Most auto mobile insurance policies describe the amount of liability coverage in a series of three numbers called
Split Limits
Combined Single Limit
● Maximum per-occurrence limit
● Includes bodily injury AND property damage
Coverage is “primary” if it involves a car
the insured owns
Coverage is “secondary” if it involves a car
the insured does not own
For example…
Say Nancy borrows Micah’s car and then gets into an accident with it. Micah’s insurance will pay first, not Nancy’s.
Since it was Micah’s car, his coverage is primary, and Nancy’s coverage is secondary.
Nancy’s insurance will pay any damages that Micah’s policy does not pay.
Out of State Provision
If you meet your home state’s requirements, it is assumed you meet the requirements of any other state.
Part A (liability) – Supplementary Payments
● Assist policyholder with a variety of accident-related expenses
● Not subject to liability limits
Part A– Supplementary Payments May include:
● Lost wages (due to court hearings): up to $250/day
● Expenses due to insurer’s request such as retrieving accident reports or
records, copy fees
● Bail bonds: up to $250
● Accrued interest after a judgment is entered
● Premiums on appeal bonds and attachment bonds
Assist policy holder with a variety of accident-related expenses
Auto Liability coverage does NOT include:
● Intentional damage or injuries (e.g. vehicular assault)
● Property owned or being transported by the insured
● Damages incurred under the scope of employment, except domestic employees ineligible for workers’ comp
For example…
Imagine Emily gets into an accident while returning her friend’s laptop, and the laptop is destroyed in the collision. Emily’s liability coverage will
not cover the laptop, even
though someone else owns it.
Auto Liability coverage also excludes:
● Properties rented to or used by the insured (not including rented dwellings or
private garages)
● Hired vehicles transporting people or goods (i.e. taxis)
● Company-owned business vehicles
● Damagesor injuries caused while repairing, servicing, parking, or storing
vehicles (i.e. mechanics, valets, vehicles released to storage facility)
● Vehicles taken without permission
No-Fault Insurance
● Designed to indemnify the insured for his own injuries, regardless of fault
● Covers bodily injury only (usually not property damage)
● Mandatory in some states
For example…
So, if Megan rear-ends Bob and causes him a severe neck injury, Bob will have to file a claim with his
own insurer for his injury, even though it was Megan’s fault!
Part B- Medical Payments
● Provides coverage for the insured
● Pays medical expenses of the insured et al, no matter who caused them
● Applies when anyone considered an insured under the policy is occupying or
struck by auto or trailer designed for public roads
● Includes vehicle-pedestrian accidents
is a form of no-fault insurance
The Part B insuring agreement:
● Says the insurer will pay for medical and funeral costs when an insured (i.e.
anyone considered insured under the policy) is injured in an auto accident
● Covers eligible medical payments for up to three years
● Applies a single limit for each person per incident
Common limits: $500, 1,000, $2,000, $5,000, etc.
“Insured” covered person
- The named insured or a family member
- Any person occupying “your covered auto”
Common Exclusions to Medical Payments:
● Accidents where an insured is occupying a vehicle with fewer than four wheels
● Autos rented or leased for hire
● Autos used without permission (or reasonable belief of permission)
● Commercial vehicles covered by a Business Auto Policy (BAP)
● Vehicles located for use as a residence
● Injuries sustained under scope of employment (if covered by Workers’ Comp)
Medical payments begin only after Personal Injury Protection (PIP) coverage is fully exhausted.
Medical payments begin only after ________ ______ __________ (___) coverage is fully exhausted.
Personal Injury Protection (PIP)
Part C– Uninsured/Underinsured Motorist Coverage
● Covers bodily injuries caused by people with insufficient or no insurance
● Coverage for physical damage can be added by endorsement
Uninsured Motorist (UM):
- Driver with no liability insurance
- Driver whose insurer won’t pay
- Hit-and-run driver
Underinsured Motorist (UIM):
Driver who does not have enough insurance to pay for all damages
Part C Insuring Agreement:
Insurer agrees to pay for an “insured’s” injuries or damages caused by driver of an
uninsured vehicle.
“Insured”:
● The named insured or a family member
● Anyone in a “covered auto” with permission
Exclusions to UM/UIM Coverage:
● The insured’s own auto that is not listed in the policy
● Government vehicles
● Off-road vehicles (but only while not on public roads)
● Vehicles used as a premises
● Covered autos that are rented or used for hire (although the interpretation of
this phrase varies)
● Cars used without reasonable belief that permission was granted
Part D– Physical Damage, Damage to your Auto
● Protects the insured’s financial interest in her car
● Two types: Collision and Other Than Collision
● Often required by finance companies
Part D– Collision Coverage
● Pays for damage to insured’s vehicle caused by collision or rollover
○ a car that has been tipped or rolled over is known as an “upset vehicle”
● Applies even when insured is at-fault
● Includes “your covered auto” and any “non-owned” car the insured is driving
(unless the insured borrows it frequently: then it is not covered)
Payment After a Collision Total damage: insurer pays
ACV of the car at the time of collision
Payment After a Collision Partial damage: insurer pays
to repair the car with similar materials
Payment After a Collision Transportation (car rental) expenses:
$30/day, up to $900 (previous versions of
the policy offered lower amounts: $20/day, up to $600)
Part D– Other Than Collision also called
Comprehensive Coverage
Part D– Other Than Collision (comprehensive coverage)
● Covers damages not caused by collision or overturn
● Essentially “open-peril” coverage, minus exclusions
Comprehensive Coverage Covered perils:
● Theft
● Hail, water, or flood
● Windstorm
● Fire
● Vandalism
● Explosion
● Earthquake
● Riot/Civil unrest
● Missiles or falling objects
● Contact with birds or animals
Payment After a Loss Same as Collision Coverage:
● Total damage: insurer pays ACV of the car at the time of collision
● Partial damage: insurer pays to repair the car with similar materials
● Transportation (car rental) expenses: $30/day, up to $900
Exclusions for Damage to Your Auto
● Normal wear and tear
● Freezing
● Mechanical or electrical breakdown
● Tire damage
● Government or civil confiscation
● Losses to non-owned autos taken without permission
● Losses involving any racing or speed event or facility
● Stereo equipment and electronics (unless permanently installed, then subject
to limits)
● War and nuclear events
Personal Injury Protection (PIP)
Covers injuries to the insured et al. caused by an accident, no matter who was at
fault.
Advantages of No-Fault PIP:
● Fewer lawsuits
● Helps contain rising automobile insurance costs
● First party rather than third party claims
● Quicker reimbursements
● Pays up to the policy limit without recourse
PIP pays for the bodily injuries of:
● The insured and members of household, whether in the insured’s or another
vehicle
● Children of the insured while on a school bus
● Certain passengers without their own PIP
● Licensed drivers who drive the insured’s vehicle with permission
