Beware of Step-Down Provisions in Auto Insurance Policies

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When you pay extra for auto liability insurance, you expect to get better coverage, not worse. But if yours is one of the many policies containing step-down provisions, your benefits could be cut off just when you need it most.

Many Michigan drivers choose to go beyond the mandatory state minimum auto liability insurance to make sure their families are protected after a serious auto accident. That way, if they cause an accident, their insurance pays for the damages and they won’t lose their savings.

But what some Michigan drivers don’t know is that many Michigan auto liability insurance policies have what are called “step down provisions.” These paragraphs, often buried in the middle of lengthy policy manuals, cut off coverage when your family needs it most.

Take Cindy Ruzak’s case, for example. In 2004, her husband Jay nodded off while driving with Cindy. She told WoodTV:

“I heard him say some expletive as he instantly realized we were starting to go off the road,” Cindy Ruzak recalled. “I looked up and saw a telephone pole coming at me and I instinctively closed my eyes.”

Jay’s reflexes kept them from hitting the pole, but the car slammed into a four-foot wide oak tree passenger-side first. As a result of the crash, Cindy fractured her neck, smashed her femur, and broke her jaw in two places. She was in the hospital for 6 weeks and spent another 3 in a wheel chair.

The Ruzak’s no-fault insurance covered all of her medical expenses and three years of attendant care costs, but there is more to recovery than doctors’ bills.

“You could argue even now … I could use more help. I can’t afford more help,” she said.

That’s where Jay’s liability coverage should have kicked in. The Ruzaks had purchased $300,000 in liability coverage through USAA. But because her injuries were caused by her husband the step-down clause kicked in. The provision automatically cut the policy down to Michigan’s mandatory minimum of $20,000 per person, or $40,000 per crash.

Auto insurance companies say they haven’t received any complaints about their step-down provisions, but that may be because so few policy holders know that they have one until it is too late. If you want to know if your policy is affected, look for language like this:

“There is no coverage for BI (bodily injury) for which a covered person becomes legally responsible to pay a member of that covered persons’ family residing in that covered person’s household. This exclusion applies only to the extent that the limits of liability for coverage exceed $20,000 for each person or $40,000 for each accident.”

Not all Michigan liability insurance policies have step-down provisions. If yours does, consider changing companies to find a provider that will protect you no matter who caused your injures.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. If you have been in a serious auto accident, contact Christensen Law for a free consultation today.