Why your family member may not get covered under the limit you selected
Step-down clauses are one of the most controversial topics in car insurance, and they exist in only 13 states. Step-down clauses prevent family members from collecting more than the state’s minimum coverage in at-fault accidents, even if you have much higher liability limits.
In other words, if you have a step-down clause on your policy and get into an accident while a family member is in your car, that family member could collect only the state’s minimum amount in coverage; the limit you’ve selected for your policy won’t apply. These clauses apply to family members only, and states offer them to prevent fraudulent claims.
Let’s learn more about step-down clauses, which are also known as an intra-family limitation or intra-family exclusion clauses.
Not all car insurance policies contain step-down clauses, but you should know if yours does.
A step-down clause, or step-down provision, is a part of a car insurance policy that prohibits an injured family member of a driver from collecting the full amount of bodily injury liability coverage the driver has selected on their policy. They can collect up to the state’s minimum liability coverage only.
Let’s say you live in Michigan, one the 13 states where step-down clauses are legal. If you got into an accident with a family member in the car and you have a step-down clause, the family member could collect up to $50,000 in bodily injury liability coverage, the minimum coverage in Michigan, even if your limit is $500,000. Still, you and any other non-family member in the car could collect up to your limit of $500,000.
According to car insurance companies, step-down clauses exist to prevent fraudulent claims. However, in Michigan, fraudulent claims are already illegal under MCL 500.4511(1) and punishable by the following:
Car insurance policies also prohibit fraudulent claims explicitly. Plus, if a provider thinks a claim is fraudulent, it can dispute the claim. Many traffic and personal injury lawyers say that step-down clauses are unjust and solely a way for insurance companies to avoid paying claims and collect increased profits. Tom Sinas, a personal injury attorney based in Grand Rapids, Michigan, called step-down clauses “repugnant and reprehensive … one of the frightening and dangerous insurance laws in our state.”
While an insurance policy with a step-down clause may be cheaper, you will end up paying more if a family member gets injured in an accident that occurs while you’re driving. In sum, finding cheaper car insurance isn’t worth it if your policy includes a step-down clause.
Step-down clauses are legal in the following states:
However, some states explicitly prohibit step-down clauses:
To protest step-down clauses, call your state’s department of insurance. See below for the contact information.
|State||Website of the insurance department||Phone number of the insurance department||Mailing address of the insurance department|
|Alabama||http://www.aldoi.gov||334-269-3550||201 Monroe St., Suite 502
Montgomery, AL 36104
|Alaska||https://www.commerce.alaska.gov/web/ins/||907-269-7900||550 W. Seventh Ave., Suite 1560
Anchorage, AK 99501-3567
|Arizona||https://insurance.az.gov/||602-364-3100||100 N. 15th Ave., Suite 261
Phoenix, AZ 85007-2630
|Arkansas||https://insurance.arkansas.gov/||501-371-2600||1 Commerce Way
Little Rock, AR 72202
|California||http://www.insurance.ca.gov||800-927-4357||300 S. Spring St., South Tower
Los Angeles, CA 90013
|Colorado||https://doi.colorado.gov/||303-894-7499||1560 Broadway, Suite 850
Denver, CO 80202
|Connecticut||https://portal.ct.gov/cid||860-297-3900||153 Market St., Seventh Floor
Hartford, CT 06103
|Delaware||https://insurance.delaware.gov/||302-674-7300||1351 W. North St., Suite 101
Dover, DE 19904
|District of Columbia||http://www.disb.dc.gov||202-727-8000||1050 First St. NE, 801
Washington, D.C. 20002
|Florida||http://www.floir.com||850-413-3140||The Larsen Building
200 E. Gaines St., Room 101A
Tallahassee, FL 32399-0301
|Georgia||https://oci.georgia.gov/||404-656-2070||2 Martin Luther King Jr. Drive, West Tower, Suite 702
Atlanta, GA 30334
|Hawaii||http://cca.hawaii.gov/ins/||808-586-2790||P.O. Box 3614
Honolulu, HI 96811
|Idaho||http://www.doi.idaho.gov/||208-334-4250||700 W. State St., Third Floor
Boise, ID 83720-0043
|Illinois||https://insurance.illinois.gov/||217-782-4515||320 W. Washington St.
Springfield, IL 62767-0001
|Indiana||http://www.in.gov/idoi||317-232-2385||311 W. Washington St., Suite 300
Indianapolis, IN 46204-2787
|Iowa||https://iid.iowa.gov/||515-654-6600||1963 Bell Ave., Suite 100
Des Moines, IA 50315
|Kansas||https://insurance.kansas.gov/||785-296-3071||1300 SW Arrowhead Road
Topeka, KS 66604-4073
|Kentucky||https://insurance.ky.gov||502-564-3630||500 Mero St. 2 SE 11
Frankfort, KY 40601
|Louisiana||http://www.ldi.la.gov||225-342-5423||1702 N. Third St.
Baton Rouge, LA 70802
|Maine||https://www.maine.gov/pfr/insurance/||207-624-8475||34 State House Station
Augusta, ME 04333-0034
|Maryland||http://www.mdinsurance.state.md.us||410-468-2090||200 St. Paul Place, Suite 2700
Baltimore, MD 21202
|Massachusetts||https://www.mass.gov/orgs/division-of-insurance||617-521-7794||1000 Washington St., Suite 810
Boston, MA 02118
|Michigan||https://www.michigan.gov/difs/||517-284-8800||530 W. Allegan St.
Lansing, MI 48933
|Minnesota||https://mn.gov/commerce/industries/insurance/||651-296-4026||85 Seventh Place E., Suite 500
St. Paul, MN 55101
|Mississippi||http://www.mid.state.ms.us||601-359-3569||1001 Woolfolk State Office Building 501 N. West St.
Jackson, MS 39201
|Missouri||https://insurance.mo.gov/||573-751-4126||301 W. High St.
P.O. Box 690
Jefferson City, MO 65102-0690
|Montana||https://csimt.gov/||406-444-2040||840 Helena Ave., Suite 270
Helena, MT 59601
941 O St., Suite 400
Lincoln, NE 68508-3639
|Nevada||https://doi.nv.gov/||775-687-0700||1818 E. College Parkway, Suite 103
Carson City, NV 89706
|New Hampshire||https://www.nh.gov/insurance/||603-271-2261||21 S. Fruit St., Suite 14
Concord, NH 03301-7317
|New Jersey||https://www.state.nj.us/dobi/index.html||609-292-5360||20 W. State St.
P.O. Box 325
Trenton, NJ 08625
|New Mexico||https://www.osi.state.nm.us/||855-427-5674||1120 Paseo de Peralta, Suite 428
Santa Fe, NM 87501
|New York||https://www.dfs.ny.gov/||212-480-6400||25 Beaver St.
New York, NY 10004
|North Carolina||https://www.ncdoi.gov/||855-408-1212||1201 Mail Service Center
Raleigh, NC 27699-1201
|North Dakota||https://www.insurance.nd.gov/||701-328-2440||State Capitol
600 E. Boulevard Ave., Dept. 401, Fifth Floor
Bismarck, ND 58505-0320
|Ohio||https://insurance.ohio.gov/wps/portal/gov/odi||614-644-2658||50 W. Town St., Third Floor, Suite 300
Columbus, OH 43215-1067
|Oklahoma||https://www.oid.ok.gov/||405-521-2828||400 NE 50th St.
Oklahoma City, OK 73105
|Oregon||https://dfr.oregon.gov/Pages/index.aspx||503-947-7980||P.O. Box 14480
Salem, OR 97309-0405
|Pennsylvania||https://www.insurance.pa.gov/Pages/default.aspx||717-787-2317||1326 Strawberry Square
Harrisburg, PA 17120
|Rhode Island||https://dbr.ri.gov/divisions/insurance/||401-462-9500||1511 Pontiac Ave.
Cranston, RI 02920
|South Carolina||https://doi.sc.gov/||803-737-6160||1201 Main St., Suite 1000
Columbia, SC 29201
|South Dakota||https://dor.sd.gov/||605-773-4104||445 E. Capitol Ave.
Pierre, SS 57501-3185
|Tennessee||https://www.tn.gov/commerce/insurance-division.html||615-741-2241||500 James Robertson Parkway, Suite 660
Nashville, TN 37243-0565
|Texas||https://www.tdi.texas.gov/||512-676-6000||333 Guadalupe St.
Austin, TX 78701
|Utah||https://insurance.utah.gov/||801-957-9200||4315 S. 2700 W., Suite 2300
Taylorsville, UT 84114-6901
|Vermont||https://dfr.vermont.gov/industry/insurance||802-828-3301||89 Main St., Drawer 20
Montpelier, VT 05620-3101
1300 E. Main St.Richmond, VA 23219
P.O. Box 40255
Olympia, WA 98504-0255
|West Virginia||http://www.wvinsurance.gov||304-558-3386||West Virginia Lottery Building
900 Pennsylvania Ave.
Charleston, WV 25302
|Wisconsin||https://oci.wi.gov/Pages/Homepage.aspx||608-266-3585||125 S. Webster St.
Madison, WI 53703-3474
106 E. Sixth Ave.
Cheyenne, WY 82002
After you contact your state’s insurance department, contact the insurance commissioner to complain about the legality of step-down clauses.
Many people aren’t aware that their insurance policies have step-down clauses. Most likely, your car insurance agent or broker didn’t tell you about this clause when you bought the insurance policy originally.
To see if you have a step-down clause, you’ll need to read your insurance policy. Look for language that talks about excluding bodily injury coverage for relatives. If you’re unsure if your policy includes a step-down clause, contact the agent or broker from whom you purchased the insurance.
If you find out you have a step-down clause and you transport family members in your car regularly, you should switch insurance companies as soon as possible to get the coverage you pay for.
Let’s say you’re a Michigan mom driving your son and his friend to soccer practice. You bump into the car in front of you, and all three of you are injured.
Unfortunately, your $250,000 of bodily injury liability coverage will apply only to you and your son’s friend. Your son would be limited to the state’s minimum coverage of $50,000. In other words, you would have to pay out of pocket for any of your son’s medical costs above $50,000.
To put it simply, step-down clauses are legal because both insurance commissioners and state appellate courts allow them.
Take the 2004 case of Ruzak v. USAA, for example. A woman was injured when her husband fell asleep behind the wheel and hit a tree with her in the passenger seat. Even though he had $300,000 worth of liability coverage, his wife was only covered up to $20,000, the minimum liability coverage at the time. Unfortunately, the Michigan State Court of Appeals said the step-down clause was legal, as did the Supreme Court when the woman appealed the case.3
However, many groups work tirelessly to end step-down clauses, saying they are unfair, so the tides could eventually change.
Be careful when buying insurance from any of the following companies, as they allow step-down clauses:
Don’t sign up for a policy without reading it thoroughly, or having a lawyer read it thoroughly for you. Step-down clauses are one of the many perils you could face from an auto insurance company. To learn more about car insurance coverages, read about liability coverage, mechanical coverage, and uninsured and underinsured motorist coverage.
Learn even more information about step-down clauses below.
A step-down clause is a part of a car insurance policy that states that family members will be covered up to the minimum coverage amount that the state requires and not the bodily injury liability limit you’ve selected.
You can downgrade your car insurance, so long as you’re meeting your state’s required minimum coverages. However, note that if you get into an accident, you may have to pay more out of pocket.
Step-down clauses are legal in the following states:
These are some insurance companies that allow step-down clauses:
500.4511 Violation as felony; penalty; notice to licensing authority. Michigan Legislature. (1996).
Risk Management. The Rough Notes Company.
CYNTHIA C. RUZAK, v USAA INSURANCE AGENCY. STATE OF MICHIGAN COURT OF APPEALS.
Step-Down Auto Insurance Clause: Every Michigan Family’s Nightmare. Sinas Dramis.
AUTO INSURANCE STEP-DOWN CLAUSES AND HOW THEY HURT MICHIGAN FAMILIES. Christensen Law. (2022, Mar 15).