Insurance Center

Carrying insurance on your vehicle is mandatory in Michigan, even on that clunker you only drive to work―you know, the one you bought for $200. That's because it isn't only your property the state wants to make sure is protected―it's also other people and their property. And while the cost to fully insure your vehicle can seem prohibitive at times, it is the best, well, insurance you can have against a major financial setback.

Michigan, like many other states, has adopted the "no fault" concept of auto insurance. What that means is that your insurance covers you, and the other party's insurance covers them. It took effect in 1973 and has been a model program that other states have looked to in designing their own.

The key to no-fault insurance is that it compensates all victims quickly and completely. Your medical expenses and lost wages will be paid, and damage caused to other people's parked vehicles and property will be covered―without worrying about who caused the accident.

And despite rising medical costs, increasing repair bills, and the excellent benefits provided by no-fault coverage, the system has continued to function without a huge increase in costs.

Mandatory Coverage

If you own a passenger car, van, or light truck, you need Michigan no-fault insurance. Out-of-state insurance policies, even those from other no-fault states, can't be used to insure a vehicle that's registered in Michigan.

You must carry coverage for bodily injury and property damage, personal injury protection (PIP), and property protection insurance. And if your car is financed, the lender might require that you buy collision and comprehensive insurance as well, to pay for vehicle damage and loss.

Personal Injury Protection

You are covered in the United States and in Canada while riding in any car and as pedestrians. You can reduce your premium costs by accepting higher deductibles―the amount you pay before your coverage kicks in―for medical services and income-replacement benefits.

Your insurance pays you for:

• All reasonable and necessary medical expenses.

• A maximum of $4,400 per month of lost wages for three years (although you can purchase higher benefits).

• Up to $20 per day for services you can no longer perform.

• Survivors' loss benefits and replacement services benefits are paid to the insured's dependents in case of death.

• Funeral and burial expense benefits.

Property Protection

You've seen the pictures in newspapers of a car's trunk sticking out of the side of somebody's house, right? That's one of the things property protection is for: damages your car does to other people's property, regardless of who's to blame.

Your policy:

• Pays up to $1,000,000 maximum per incident (vehicles are excluded, unless properly parked)

• Doesn't pay for accidents occurring outside of Michigan.

Residual Liability

This is more of a catchall type of coverage that provides you with a minimum of protection if you're sued or held legally responsible in several circumstances. You should consider purchasing higher limits, but the bare-bones coverage is $20,000 for one person's injury, $40,000 for all persons injured in one accident, and $10,000 for property damage.

You're protected in:

• Accidents involving death, serious impairment of body function, or permanent, serious disfigurement.

• Accidents where actual losses exceed your PIP coverage.

• Accidents occurring outside of Michigan for property damage and bodily injury.

Optional Coverage

With the price of vehicle repairs today, optional coverage has become more of a necessity. Even if you're able to pay cash for that brand-new BMW, if somebody rear-ends you it's going to do some serious damage to your bottom line if you don't have collision coverage. If you financed your purchase, chances are good the bank required you to buy both collision and comprehensive.

Collision Coverage

There are basically three forms of collision insurance. All pay for damage to your car if it collides with something or rolls over. To keep your policy premiums lower, you can opt for a higher deductible―the amount you pay out of pocket to repair damages to your vehicle.

Collision options:

• Standard coverage will pay for damage to your vehicle, regardless of fault. You always are responsible for your deductible.

• Broad coverage also pays regardless of fault, but if you're more than 50% responsible for the accident, then you pay the deductible.

• Limited only pays for damage to your vehicle if you were deemed to be less than 50% at fault. You are always responsible for the deductible.

Other Insurance Options

What if a tree falls on your car, or the neighborhood kids decide your black car looks really cool with yellow racing stripes, or your windshield is shattered by a stone? There are a number of insurance products available that will help make sure you get where you want to go.

• Comprehensive: Pays for any losses to your car not caused by collisions, like theft, fire, or vandalism.

• Uninsured motorist: Pays what you would be legally entitled to collect for injuries caused by an uninsured driver.

• Road service: Pays for assistance, like towing, flat-tire repair, and other assorted mechanical ailments that disable your vehicle.

• Extra equipment coverage: Raises coverage limits for attached parts―like spoilers―not installed by or available from the original manufacturer.

• Car rental coverage: Reimburses you for rental car usage if your car is out of service.

Carry Your Certificate―or Else

By law, you must always have proof of insurance with you when you drive your vehicle. If you're stopped and you can't present your certificate to a law enforcement officer, your license could be suspended. Keep proof of insurance in the glove compartment of every car you own.

Auto Insurance FAQs

Why do young drivers pay so much for insurance?

It might seem unfair, but it's a bottom-line issue: Young drivers, on average, have more accidents that have more costly repairs than do older drivers.

Do I have to have insurance?

Yes. You must have a basic no-fault policy or face a fine of up to $500 and a year in jail if you drive without it.

What if I drive my parents' car?

You need to let your insurance company know that you'll be driving the family car. Rates will be higher.

How can I cut my insurance costs?

The quickest way is to select the basic coverage, but that's not always the right way because it might not provide you with adequate protection. You can control costs by selecting higher deductibles, driving less, maintaining a good driving record, and selecting a vehicle with a better safety rating and lower repair costs.