Uninsured and Underinsured Motorist Coverage in Michigan: What You Need to Know

Auto insurance can be complicated when it comes to understanding the various coverage options designed to protect you from other drivers. Two critical types of coverage- uninsured motorist (UM) and underinsured motorist (UIM) protection-can make a significant difference if you’re involved in an accident with a driver who lacks adequate insurance. Using Michigan’s auto insurance framework as a guide, I’ll explore what these coverages are, how they differ, and why they matter to Michigan drivers. 

Understanding Uninsured Motorist Coverage

Uninsured motorist coverage provides protection when you’re injured in an accident with an uninsured driver in Michigan and the at-fault driver has no insurance whatsoever. Despite the state’s mandatory auto insurance requirements, a concerning percentage of drivers operate vehicles without valid insurance. According to industry estimates, approximately 20–25% of Michigan drivers are uninsured, placing the state among the top ten states with the highest rates of uninsured motorists in the country.

How Uninsured Motorist Coverage Works in Michigan

When you have UM coverage and are injured by an uninsured driver, your insurance company should step in to cover those injuries and damages up to the policy limits you take out in your coverage. This typically includes compensation for your lost wages beyond what PIP covers, Pain, suffering and damages for permanent disability or disfigurement.

It’s important to note that in Michigan’s auto insurance system, uninsured motorist coverage is not mandatory. It’s an optional coverage that drivers can add to their policy. Although some insurance professionals strongly recommend it because of the state’s high number of uninsured drivers others use, other insurance agents try to convince applicants NOT to purchase the coverage as an artificial way to trick them into thinking that they can save money on the overall premium. Bad Idea!! 

Michigan’s No-Fault System and Uninsured Motorist Coverage

The State of Michigan has statutorily imposed a no-fault insurance system, which affects how UM coverage functions. Under the no-fault system, your insurance company pays for medical expenses and certain economic losses regardless of who’s at fault in an accident through Personal Injury Protection (PIP) coverage. However, PIP does not compensate for pain and suffering or excess economic damages, which is where UM coverage becomes valuable. 

Understanding Underinsured Motorist Coverage

Underinsured motorist coverage, while similar to UM coverage, addresses a different problem. UIM protection applies when you’re in an accident with a driver who has insurance, but their policy limits are insufficient to cover the full extent of your injuries. 

How Underinsured Motorist Coverage Works

Let’s consider an example: You’re involved in a serious accident where the at-fault driver carries the Michigan minimum liability coverage of $50,000 per person and $100,000 per accident for bodily injury. However, your injuries result in $150,000 of medical expenses, lost wages, and pain and suffering. In this scenario, the at-fault driver’s insurance would only cover $50,000, leaving you with a $100,000 shortfall. 

If you have UIM coverage with limits of $250,000 per person, your insurance company would cover the difference between the at-fault driver’s insurance payment and your actual damages, up to your UIM policy limit. In this example, your UIM coverage would provide the additional $100,000 needed to compensate you fully. 

Like UM coverage, underinsured motorist protection is optional in Michigan but highly recommended by insurance professionals. 

Key Differences Between UM and UIM Coverage

While UM and UIM coverages serve similar purposes, there are important distinctions: 

Trigger for Coverage: UM coverage applies when the at-fault driver has zero insurance, while UIM coverage applies when the at-fault driver maintains a small insurance policy. 

Coordination of Benefits: UIM coverage typically works as “excess” coverage above what you receive from the at-fault driver’s insurance, while UM coverage is the primary source of compensation since there is no other insurance available. 

Policy Limits Structure: In Michigan, UIM coverage often includes “set-off” provisions, meaning your UIM limit is reduced by whatever amount you receive from the at-fault driver’s insurance. For example, if you have $100,000 in UIM coverage and receive $25,000 from the at-fault driver’s insurer, you will have $75,000 in remaining UIM coverage. 

Proof Requirements: Claims for UM coverage require proving the other driver was uninsured, while UIM claims require documenting both the at-fault driver’s policy limits and that your damages exceed those limits. 

Cost Considerations and Coverage Limits: The cost of UM and UIM coverage in Michigan is relatively reasonable compared to other auto insurance components. Typically, adding both coverages might increase your premium by approximately 5-10%, though this varies based on your driving record, location, and selected coverage limits. 

Insurance professionals generally recommend matching your UM/UIM limits to your bodily injury liability limits when selecting coverage limits. This approach ensures consistent protection regardless of who causes the accident. 

Recent Michigan Auto Insurance Reforms and Impact on UM/UIM Coverage

In 2019, Michigan enacted massive auto insurance reforms that changed the state’s insurance landscape. While these reforms primarily affected Personal Injury Protection (PIP) benefits by allowing drivers to choose coverage levels rather than mandating unlimited medical coverage, they also indirectly impacted UM/UIM coverage.

Any Michigan auto insurance guide would now emphasize how, with lower PIP limits available, having strong UM/UIM protection is more important than ever. If you’re seriously injured by an uninsured or underinsured driver and have selected lower PIP coverage, your UM/UIM policy becomes a critical financial safety net.

Making a UM or UIM Claim in Michigan

If you’re involved in an accident with an uninsured or underinsured driver in Michigan, the claims process typically follows these steps: 

• Report the accident to your insurance company promptly. 
• Provide documentation proving the other driver was uninsured or underinsured. 
• Submit medical records and expense documentation to substantiate your damages. 
• Work with your insurance company’s adjusters to evaluate your claim. 
• If necessary, negotiate the settlement amount with your insurance company. 

It’s worth noting that in Michigan, UM/UIM claims are essentially contractual disputes with your own insurance company rather than claims against the at-fault driver. This means that if you disagree with your insurer’s handling of your claim, you may need to pursue arbitration or litigation as specified in your policy. 

Common Misconceptions About UM and UIM Coverage

Several misconceptions exist regarding these important coverages: 

Misconception: “I have full coverage, so I’m already protected against uninsured drivers.” 

Reality: “Full coverage” is not a specific insurance product and typically refers to having both comprehensive and collision coverage. These do not include UM/UIM protection unless specifically added. 

Misconception: “Michigan’s no-fault system means I don’t need to worry about other drivers’ insurance.” 

Reality: Michigan’s no-fault system only covers medical expenses and some economic losses through PIP. UM/UIM coverage provides additional protection for pain and suffering and excess economic damages. 

Misconception: “The minimum required insurance in Michigan is enough coverage to keep me economically safe.” 

Reality: Michigan’s minimum liability requirements ($50,000 per person/$100,000 per accident) may be insufficient for serious accidents, making UIM coverage valuable. 

Why Uninsured and Underinsured Motorist Coverage Is Essential for Michigan Drivers

Uninsured and underinsured motorist coverage serves as essential safeguards for the average driver in the State of Michigan because of the state’s high percentage of uninsured drivers and the potential for serious accidents resulting in damages exceeding minimum policy limits, both UM and UIM protection provide critical financial security. 

While these coverages represent an additional cost on your auto insurance policy, the relatively modest premium increase offers significant protection against potentially catastrophic financial exposure. As Michigan’s auto insurance system continues to evolve, maintaining adequate UM/UIM coverage remains one of the most prudent decisions a driver can make to protect themselves and their family. 

Before finalizing your auto insurance policy, consider consulting with a licensed insurance professional who can help tailor your UM/UIM coverage to your specific needs and circumstances, ensuring you have appropriate protection on Michigan’s roads.

Contact our lawyer team at Wigod & Falzon PC to know more about Uninsured and Underinsured Motorist Coverage options in Michigan.