With the new changes to Michigan’s No-Fault auto insurance law that began on July 2, 2020, all drivers now face increased liability risk if they cause a serious car accident. The most significant change is that an “at-fault” driver can now be sued for “excess” medical expenses.

“Excess” medical expenses reflect the portion of a car accident victim’s crash-related medical bills that are not paid because they “exceed” the limit of what is covered by No-Fault auto insurance. Before the new law allowed drivers to limit their No-Fault medical coverage, being held liable for “excess” medical expenses was not an issue because all drivers were required to carry “unlimited” medical coverage. Now, the at-fault driver who causes a serious car accident could be held responsible for an injured person’s “excess” medical expenses, thus substantially raising the liability risk for all drivers.

This poses a new and significant financial threat to drivers because in addition to being potentially liable for an award for pain and suffering compensation, drivers could now be financially liable for millions of dollars in medical costs over the lifetime of the person or persons injured in the car crash that the driver caused.

Extra liability coverage provides valuable protection against this financial threat by covering the difference between what a driver who causes a car accident may be liable for and what the driver’s liability coverage in his or her auto insurance policy will pay for. The extra liability coverage protects the driver’s personal assets from being used to pay for his or her liability.

Extra liability coverage can be any amount, but for individual drivers it is most common to see insurance plans of $1 million and $2 million. A few hundred dollars can buy you $1 million or $2 million of additional liability coverage protection.

What is covered under these types of insurance policies?

Up to the limit in your policy, an extra liability insurance policy will cover your car accident-related liability for pain and suffering compensation and “excess” medical expenses that is not covered by your third-party car insurance.

Coverage recommendations

I recommend that Michigan drivers purchase this type of coverage with limits of no less than $1 million, which can often be purchased for under $200. Some companies offer this coverage with limits that range from $1 million to $5 million or even $10 million.

Do I need extra liability?

Drivers need extra liability coverage to supplement the liability coverage they have through their own car insurance. If you cause a car accident that results in medical bills and pain and suffering damages that exceeds the limits of your liability insurance, this coverage will pay the difference up to the amount of extra coverage you paid for.

This is crucially important for Michigan drivers especially with the new auto law. The new changes that took effect in July of 2020 now mean that all Michigan drivers face the very real risk of being responsible for hundreds of thousands or millions of dollars in car accident-related medical bills that previously were covered by auto No-Fault insurance.

Who needs extra liability insurance?

Many Michigan drivers may be asking why you need umbrella policy coverage with auto insurance. Every driver who has significant, personal assets needs this additional type of coverage. This insurance protects a driver’s personal assets from being taken in a lawsuit and used to pay what the driver owes if the medical bills, economic losses and pain and suffering compensation he or she is deemed liable for exceeds the amount of liability coverage the driver has in his or her auto insurance policy.

What is not covered by an extra liability policy?

An extra liability policy will not cover your own car accident-related medical bills, replacement services, attendant care and lost wages or your own pain and suffering or your own economic losses if you are too injured to work. It also will not pay to repair damage to your car.

It can, however, cover injuries and economic losses if you are injured by an uninsured or underinsured driver. Talk to an experienced insurance agent to purchase this extra coverage that can, for an additional premium, be added to cover harms and losses over and above your own uninsured and underinsured insurance coverage.