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The Step Down

The Step Down


On the Let’s Talk Insurance podcast we try to offer “generalized” insurance topics and information in order to reach a wider audience. This week we decided to tackle an insurance topic that is specific to a few states including Michigan.

Our agency has been fielding phone calls in regards to a local news station’s investigative report with regard to a little-known clause in auto insurance policies that has been nicknamed “the step down”.

We want to make sure that Michigan residents understand that this clause does not affect the medical portion of your auto policy. Under Michigan’s “no-fault” insurance coverage, injuries due to an auto accident are covered for as long as medically necessary. Most people call it “unlimited, lifetime medical”, which is essentially true. Your wages are covered for 3 years as necessary. The wage loss coverage stops once you are able to return to work or the 3 year period ends.

“The Step Down” clause affects the Bodily Injury liability portion of the auto insurance policy. The following is taken from a auto policy in regards to bodily injury liability:

“We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. We have no duty to defend any suit or settle any claim for bodily injury or property damage not covered under this policy.”

So in relation to the couple  in the news article, the husband was legally responsible for the wife’s bodily injury in the car accident. If that was all there was to the auto insurance policy, they would have filed a claim with their carrier and would have been sent a check for most-likely the policy limit based on the injuries she sustained (in their case it was $300,000).

The insurance company, however, had an amendment to the exclusions portion of the policy in regards to bodily injury that basically reads like this (the language is similar):

“The following Exclusion is added: For bodily injury to you or a family member, this Exclusion applies only to damages in excess of the minimum limits required by the Financial Responsibility Laws of the State of Michigan.”

In the definitions portion of the policy, “family member” is often defined as:

“A person related to you by blood, marriage or adoption who is a resident of your
household. This includes a ward or foster child.”

“You” is often defined as:

“The “named insured” shown in the Declarations, and the spouse if a resident of the same

The “Minimum Limits” required for the State of Michigan is $20,000 per person/$40,000 per accident for bodily injury and $10,000 for property damage.

So the couple in the news story received $20,000 instead of the $300,000 listed on their policy.

We have verified in our agency that Progressive, Grange Insurance, & Frankenmuth Insurance all contain such a clause in their auto policies. Safeco Insurance at this time does not, we are waiting to hear from Bristol West & Titan/Nationwide to see if their policies have it.

We want to reiterate once again that this clause DOES NOT affect the medical benefits on your auto policy here in the state of Michigan. Owners of automobiles in the state of Michigan pay one of the highest rates in the state due to having “unlimited, lifetime” medical coverage on their policies.

We highly recommend talking with your hometown insurance agent if “the step down” clause is of concern for you.


Contact Us!

At Marsilje & Vander Plow Insurance Agency, we can work with you to make sure you’ve got the coverage you need, while at the same time using all possible credits and discounts to make that coverage affordable. Just give us a call at 616-396-1497 or send us a note at marsiljeins@gmail.com. We want to help you meet your goals, and make sure what’s important to you is protected!

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