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Top 8 facts about Michigan collision coverage insurance

Insurance attorney explains what Michigan drivers need to know about collision coverage and why it’s so important

People know I am an auto attorney and that for nearly 20 years I’ve been dealing with the Michigan No-Fault law for a living. Perhaps it is not the most exciting party conversation, but people I meet tend to ask me questions about insurance. So for today, I want to write about two questions I hear quite often:

  • What do I need to know about collision coverage insurance?
  • Why is it so important?

After having answered those questions many times, here are my top 8 facts that drivers need to know about collision coverage insurance:

  1. Collision coverage is extremely important.
  2. Collision coverage is optional, not required.
  3. There are 4 types of collision coverage.
  4. ‘Fault’ matters for some collision coverage.
  5. Broad form collision coverage does not depend on fault.
  6. Standard collision coverage does not depend on fault.
  7. Limited collision coverage without a deductible depends on fault.
  8. Limited collision coverage with a deductible depends on fault.

1. Importance of collision coverage

“Collision coverage insurance” pays to repair a person’s car or truck if it was damaged in a Michigan auto accident.

Without collision coverage, a vehicle owner has nearly no other way of paying for the vehicle damage repair costs.

For instance, the owner of a damaged vehicle is generally prohibited from suing the “at fault” driver for the full amount of the repair costs because Michigan’s No-Fault law has essentially “abolished” the “at fault” driver’s “tort liability” for “[d]amages … to a motor vehicle.” (MCL 500.3135(3)(e))

However, when the “at fault” driver is operating a vehicle not insured under a valid No-Fault auto insurance policy, then the at fault driver can be sued and held personally liable for the full amount of vehicle damage that she or he caused.

2. Collision coverage is optional, not required

Unlike Michigan No-Fault auto insurance, collision coverage insurance is optional and not required. (See MCL 500.3101 and 500.3037)

However, for the reasons discussed above, it is highly and strongly recommended that Michigan drivers purchase collision coverage insurance, because without it they will have to pay out-of-pocket for most, if not all, of the repair costs for their accident-related vehicle damage.

3. The 4 types of collision coverage

There are four types of collision coverage insurance available to Michigan drivers, according to MCL 500.3037(1)(a) and (b) and (2):

  1. Broad form collision coverage
  2. Standard collision coverage
  3. Limited collision coverage without a deductible
  4. Limited collision coverage with a deductible.

4. Broad form collision coverage

Under Michigan’s Insurance Code, “Broad form collision coverage … shall pay for collision damage to the insured vehicle regardless of fault … [and] deductibles shall be waived if the operator of the vehicle is not substantially at fault in the accident from which the damage arose.” (MCL 500.3037(1)(b))

An operator or driver is “substantially at fault” when his “action or inaction was more than 50% of the cause of the accident.” (MCL 500.3037(7)(b))

Highlights for broad form collision coverage:

  • Pays for covered-vehicle damage resulting from an auto accident “regardless of fault,” i.e., whether the operator or driver was at fault in causing the accident.
  • Deductible is “waived” and, thus, no deductible must be paid when the operator or driver of the covered vehicle was “not substantially at fault,” i.e., 50% or less at fault, in causing the accident.

However, the deductible on a broad form collision coverage policy must be paid as a prerequisite to the insurer’s payment of benefits when the covered-vehicle’s operator or driver was “more than 50%” at fault in causing the accident. (See Michigan Office of Financial and Insurance Regulation (OFIR) publications, “[A] consumer’s guide to No-Fault Automobile Insurance in Michigan” and “The Three Types of Collision Coverage.”)

5. Standard collision coverage

Under Michigan’s Insurance Code, Michigan drivers may purchase “standard collision coverage” for their vehicles. (MCL 500.3037(2))

The main difference between “broad form collision coverage” and “standard collision coverage” is the “deductible.”

As stated above, with “broad form collision,” the deductible is waived if the operator or driver of the insured vehicle was “not substantially at fault” in causing the accident which resulted in damage to the insured vehicle.

But, under “standard collision coverage,” the deductible must still be paid even if the damaged vehicle’s operator or driver was not “at fault,” according to the Michigan Office of Financial and Insurance Regulation (OFIR)’s publications, “[A] consumer’s guide to No-Fault Automobile Insurance in Michigan” and “The Three Types of Collision Coverage.”

Benefits are payable “regardless of fault” under “standard collision coverage” just as with “broad form collision coverage.”

6. Why fault matters for collision coverage

For broad form and standard collision coverage policies, “fault” on the part of the vehicle’s operator or driver does not affect the payment of benefits. Collision benefits are paid “regardless of fault.”

However, under a broad form collision coverage policy, the deductible may be waived if the operator or driver of the insured vehicle was “not substantially at fault” in causing the accident which resulted in damage to the insured vehicle.

Meanwhile, “fault” is a critical factor in determining whether benefits are payable under limited collision coverage policies, whether with or without a deductible.

In particular, limited collision coverage and benefits will be denied when the operator or driver of the insured vehicle was “substantially at fault” in causing the accident which resulted in the vehicle damage.

7. Limited collision coverage without a deductible

Under Michigan’s Insurance Code, “Limited collision coverage … shall pay for collision damage to the insured vehicle without a deductible amount when the operator of the vehicle is not substantially at fault in the accident from which the damage arose.” (MCL 500.3037(1)(a))

An operator or driver is “substantially at fault” when his “action or inaction was more than 50% of the cause of the accident.” (MCL 500.3037(7)(b))

Highlights for limited collision coverage without a deductible:

  • Pays for covered-vehicle damage resulting from an auto accident.
  • No deductible must be paid when the operator or driver of the covered vehicle was “not substantially at fault,” i.e., 50% or less at fault, in causing the accident.

However, if the operator or driver was more than 50% at fault in causing the accident that gave rise to the vehicle damage in question, then:

  • Limited collision coverage without a deductible provides no benefits or coverage; and,
  • The vehicle’s owner will be forced to pay out-of-pocket for most, if not all, of the repair costs for his or her accident-related vehicle damage.

(See Michigan Office of Financial and Insurance Regulation (OFIR) publications, “[A] consumer’s guide to No-Fault Automobile Insurance in Michigan” and “The Three Types of Collision Coverage.”)

8. Limited collision coverage with a deductible

The only difference between this type of limited collision coverage and “limited collision coverage without a deductible” is the “deductible.”

In particular, the owner of a damaged vehicle which is covered by a “limited collision coverage with a deductible” policy must pay a deductible before his or her insurance company begins paying for the vehicle damage repairs, even if the operator or driver of the insured vehicle was not at fault in causing the accident.

By contrast, the owner of a damaged vehicle which is covered by a “limited collision coverage without a deductible” policy need not pay any deductible as a prerequisite to his insurer’s payment of benefits, so long as the operator or driver was not at fault in causing the accident.

However, under both types of limited collision coverage, if the operator or driver of the covered vehicle was more than 50% at fault in causing the accident that gave rise to the vehicle damage in question, then:

  • Limited collision coverage provides no benefits or coverage; and,
  • The vehicle’s owner will be forced to pay out-of-pocket for most, if not all, of the repair costs for his or her accident-related vehicle damage.

(See Michigan Office of Financial and Insurance Regulation (OFIR) publications, “[A] consumer’s guide to No-Fault Automobile Insurance in Michigan” and “The Three Types of Collision Coverage.”)

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Blog Author Steven M. Gursten
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