Know the Law – Life without auto no-fault

Michigan’s auto no-fault system has been around for more than 40 years. It is called a “no-fault” system because it allows people injured in auto accidents to access insurance benefits without first having to prove the other driver was at fault for the crash.

Recently, some people and organizations have been calling for a return to the system that existed before no-fault. Let’s take a look at that previous system and how it worked.

Before no-fault, auto accident victims had to prove the fault of the other driver before collecting insurance benefits, including medical expenses, lost wages, replacement services, pain and suffering damages, and so forth. Basically, proving fault meant the injured person had to file a lawsuit against the driver of the other vehicle. In turn, this often delayed treatment for injured individual.

Unlike the previous system, the current no-fault system provides accident victims quicker and easier access to the medical care they need, lost wages, etc., because injured persons do not have to first prove the other driver’s fault (i.e., file a lawsuit) before receiving insurance benefits.

One argument for doing away with Michigan’s no-fault system is that people are paying high auto insurance rates. However, people should think about what they’re getting under the current no-fault system: lifetime medical coverage for auto accident-related injuries for yourself and for family members who are injured in a car crash.

It is also important to note that, before no-fault, insurance benefits for a person injured in an accident were limited by the other driver’s policy. This meant that, if the other driver did not have good insurance, then the injured individual simply did not get good insurance benefits. In this regard, it’s also important to point out that the minimum amount of liability coverage in Michigan is $20,000. So under the previous system, if you were injured in an accident and the other driver only carried the $20,000 minimum – but you had $100,000 in medical bills – then only $20,000 of your medical bills were covered.

Under the prior system, what happened when an injured person’s medical expenses weren’t fully covered by the other driver’s policy? The accident victim had to look elsewhere for payment, including 1) health insurance, 2) Medicaid and 3) Medicare. In turn, when private health insurers, Medicaid and Medicare were picking up the tab for unpaid medical expenses, those costs were then passed along through higher health insurance premiums and taxes.

So when people say, “let’s get rid of no-fault,” everyone should harken back to when no-fault did not exist and think about what we, as Michigan residents, are getting for our money – and the consequences of not having the current no-fault system.

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