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Understanding Insurance Step-Down Policies


In the article What is an Auto-Insurance Step Down Clause, we have discussed step-down policies in insurance in Michigan. In this article, let us revisit some facts that we shared on this article.

No-Fault State

Michigan is a no-fault State.

Individuals in Michigan know that they must purchase no-fault insurance in order to remain legal on the roadway. This insurance is in place to help cover their expenses after an accident occurs, regardless of who is at fault for the incident. However, some insurance carriers insert step-down clauses into the insurance carrier that penalize family members inside the vehicle who may sustain injuries.

Understanding Insurance Step-Down Policies

Step-down policies are also known as “intra-family exclusionary” clauses.

When this is a part of the policy, the step-down insurance clause essentially means that any person unrelated to the insured individual who was injured while riding in the insured individual’s vehicle is entitled to more coverage than the insured person’s owned family members who may also be injured in the incident. Speak to an injury lawyer in Southfield to learn more. 

In other words, relatives of the insured individual will not receive as much coverage as non-related individuals.

Suppose an individual has up to $500,000 worth of coverage on their Chevy Tahoe. Imagine that they are riding with their adult brother and their adult best friend. Suppose that an accident caused by the driver of the Chevy Tahoe occurs and that both the friend and the brother sustain injuries. 

You would think that both passengers would receive coverage for their losses under the $500,000 insurance policy, but that may not be the case. Not if there is a step-down clause in the policy. 

If the driver does have a step-down clause in their insurance policy, then the company’s liability for the brother will be capped at the Michigan state minimum of $20,000 in liability coverage regardless of how severe the injuries are. However, the non-relative friend will be able to make a claim against the entire amount of the policy. 

Why Step-Down Clauses Are Legal

The courts in Michigan have continually upheld step-down clauses, and the Michigan Insurance Commissioner has not taken any steps to get rid of them. 

Insurance carriers that use these types of clauses in their policies state that they help prevent insurance fraud, but there are various arguments as to why this is not a good excuse:

  • The policies themselves have language detailing fraudulent claims. 
  • The state of Michigan makes it a crime to commit insurance fraud. 
  • The injured individual has the burden of proof for their claim, and they will have to back up any injury claim they make with evidence, which should help eliminate fraudulent claims. 

Call an Attorney for Help With a Claim

If you or someone you care about has been injured in a vehicle accident and are affected by a step-down, please reach out to a Southfield car accident attorney as soon as possible. There may be alternatives to recovering the compensation you are entitled to. Additionally, do not simply take the insurance carrier at their word. They have one goal in mind – to limit how much compensation they pay for a claim. Let an attorney examine the facts of the case and work to explore all routes of recovering compensation for your injuries.

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