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FAQ - Guide to Auto Insurance for New Drivers

What is No-Fault?

Michigan's no fault law took effect in 1973. It is an auto insurance system that allows claims to be paid more quickly. Generally, your policy takes care of you; the other driver's policy takes care of him or her.


Why Do Young Drivers Pay So Much For Insurance?

Are young drivers paying too much for car insurance? Some people think so. They feel that younger motorists are being penalized. But that isn't true.

Each driver's insurance rates are based on how likely he/she is to have an accident -- and how much it will cost. Young drivers have more crashes and more expensive losses. So, they have to pay more.

For Example:
  • Young drivers make up approximately 15 percent of the state's registered drivers, and are involved in 38 percent of Michigan's accidents.
  • Seventeen percent of the drivers under age 24 are involved in an accident each year. Only about 5 percent of motorists in the 65-74 age group have accidents annually.
  • Young driver accidents are generally more severe and costly than those caused by older motorists.

What Coverages Are Mandatory?

State law requires all Michigan motorists to have at least three policy coverages. These are called Personal Injury Protection, Property Protection and Residual Liability. These are the only coverages mandated by the state.

If your car is financed, the lender may require that you buy two more coverages: Collision and Comprehensive. These will pay for vehicle damage and loss.


Personal Injury Protection

Benefits are paid to an accident victim by his/her own insurance company. These include the following:
  • Your reasonable and necessary medical expenses.
  • Up to three years of lost wages.
  • $20 a day for services you cannot perform.
  • If you are killed, benefits for your dependents.
  • Benefits for funeral and burial expenses.
Personal Injury Protection coverage applies to accidents occurring throughout the United States and Canada.


Property Protection

This provides coverage for damage caused by your car to property of others (except moving vehicles), regardless of fault.
  • You have coverage of up to $1,000,000.
  • Vehicles are not covered, unless properly parked.

Residual Liability

This provides protection if you are sued or are legally responsible:
  • In an accident involving death, serious impairment of body function or permanent, serious disfigurement.
  • In accidents occurring outside of Michigan, for property damage and bodily injury.
  • If the actual damages from an accident exceed the amount of coverage available under Personal Injury Protection.
The required limits of this coverage are $20,000 for one person's injury, $40,000 for all persons injured in one accident and $10,000 for property damage. Higher limits may be purchased.


What Coverages Are Optional

Insurance companies also offer several optional coverages as part of the no-fault insurance policy.

Collision coverage pays for damage to your car if it rolls over or collides with something. Collision coverage is available in three forms:
  • Regular or standard - pays for damage to your vehicle, regardless of who is at fault. You always pay the deductible amount.
  • Broad - pays for damage to your vehicle regardless of who is at fault for an accident. But if you were more than 50 percent at fault you pay the deductible.
  • Limited - pays for damage to your vehicle only if you were not more than 50 percent at fault in an accident.
Other optional coverages are: Comprehensive, which pays for damage to your car resulting from causes other than Collision, such as fire and theft; Uninsured Motorist, which pays what you would be legally entitled to collect for injuries caused by an uninsured driver; and Road Service, which pays for aid when your car is disabled.


Auto Insurance Q & A's

Do I have to get insurance to drive my car?
    Yes. State law says you must get at least the basic no-fault coverages. If you don't, you can be fined up to $500. And, you can be put in jail for as long as a year.

I'm going to be driving my parents' car. Will I be covered under their insurance policy?
    Yes, but make sure your notify your insurance company or agent before you get behind the wheel.

How do insurance companies figure out how much I have to pay for a car policy?
    Premiums are based on a lot of factors. These include: your age or driving experience, the number of miles you drive, your car and where you live. Also, your driving record is a big factor.

How do I get the best buy in insurance?
    First, do your homework. Use this brochure and other references to get a basic understanding of the coverages. Know what your options are. Then, shop around. Talk to several insurance agents. Choose a policy that will give you the best combination of price, coverage and service.


How Can I Control the Cost of My Car Insurance?
Everyone is concerned about the amount they pay for car insurance. Here are a few suggestions to keep your rates as low as possible:
  • Drive less.
  • Select your car carefully.
  • Coordinate Personal Injury Protection coverage.
  • Choose higher deductibles.
  • Consider a different type of Collision Insurance
  • If you have an older car, consider dropping Collision and Comprehensive coverages.
  • Ask about special discounts.
  • Finally, and most important, drive carefully.
This information is produced by the Insurance Information Association of Michigan, a non-profit organization which sponsors a number of consumer information and education programs.


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