What to Look For in Your Auto Insurance Policy in Michigan

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No one really wants to take the time to read their entire auto insurance policy. Many can be a dozen, or even two dozen pages of small font and confusing language. But what you don’t know can hurt you. Here are a few things to look for the next time you apply for auto insurance.

Named Insured Parties

Every Michigan no-fault insurance policy is legally required to cover the policy holder (you), your spouse, and relatives who live in your household (like your children). But sometimes kids simply don’t qualify, especially in divorced families or where children have gone off to college. Look carefully at the “named insured” parties to be sure that your teenage and college-bound drivers are listed. That way there will be no question they are entitled to benefits after an accident.

Liability Insurance Caps

In serious accidents there is often liability that goes beyond no-fault benefits. Injured parties can file Third Party negligence lawsuits against an at-fault driver. Michigan’s mandatory liability insurance pays $20,000 per person or $40,000 per accident to third parties if you are found responsible for the accident. However, in a serious injury accident, $20,000 can go quickly. That’s why many Michigan residents choose to increase their liability insurance caps. When you are reviewing your insurance policy, make sure it has the right liability caps. Otherwise you could end up owing more than you bargained for.

Auto Insurance Policy Exclusions

Every insurance policy has a list of exclusions – circumstances where no-fault benefits will not be paid. Car thieves, joyriders, and excluded drivers may find themselves out of luck when a bad decision leads to a crash. If you have chosen to get more than the mandatory minimum no-fault insurance, you should pay special attention to the exclusions part of your policy. There may be also conditions that will cause that extra insurance to go away when you need it most.

Step-Down Provisions

A step-down provision is a kind of exclusion that is particularly dangerous to Michigan families. It says that where the policy holder has purchased extra liability insurance, that extra money will not be available to others covered under the policy.

Here’s how it works. You and your spouse are driving together when you hit a patch of ice and run into a wall. Your spouse is seriously injured and sues you (and your liability insurance) to pay third party damages. If your insurance policy has a step-down provision, your spouse will only be entitled to the base $20,000, instead of the additional coverage you both have been paying for over the years.

Not all insurance policies contain step-down provisions. If yours does, consider switching to a company that doesn’t use them. Otherwise your family could end up paying far more than you can afford.

It is important to take the extra time to go through the details of your auto insurance policy. Errors, omissions, and exclusions could cause your coverage to come up short when you need it most.