Auto Insurance Laws in Michigan: 2020 Reforms and Current Requirements
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Michigan eliminated the mandate for unlimited personal injury protection (PIP) on all auto insurance policies on July 2, 2020. This and other major legal reforms resulted in significant savings for Michigan drivers — more than $1,000 on average.
Michigan law now requires the following insurance minimums:
Required coverage | Required limits |
|---|---|
| Personal injury protection | $250,000 or opt out |
| Property protection insurance | $1 million per accident |
| Residual bodily injury liability | $50,000 per person and $100,000 per accident |
| Residual property damage liability | $10,000 per accident |
This article analyzes the laws and how they could lower your premiums.
Current Michigan car insurance requirements
Michigan requires every driver to carry car insurance with a minimum level of coverage.
Under Michigan's no-fault law, insurance companies cover reasonable and necessary medical expenses for drivers and their passengers injured in an accident, regardless of fault. As a result, the state has some of the most expensive auto insurance.
A valid Michigan insurance policy includes personal injury protection (PIP) and property protection insurance (PPI). These two coverages pay for your medical expenses and property damage liability due to an accident, up to your chosen limits.
Michigan also requires a minimum amount of residual liability insurance, which helps protect drivers in the event of a lawsuit. Because every Michigan driver claims medical expenses from their own PIP insurance first, you can only be sued by a fellow resident if you cause an accident in which another person is seriously injured, permanently disfigured or killed. In that case, residual liability insurance covers the other driver's medical costs and property damage, up to the limit of your policy.
No-fault insurance
Michigan is one of 12 no-fault states in the country. Under no-fault insurance laws, drivers hurt in a car accident make a claim with their own insurance company, regardless of who caused the crash.
This helps drivers get paid with as little downtime as possible. It also limits court proceedings, because accident victims don't need to prove fault in court for their medical expenses to be covered.
Personal injury protection (PIP) insurance covers medical bills and lost wages for the driver and passengers and is required in no-fault states.
Personal injury protection
Personal injury protection (PIP) in Michigan covers your medical expenses until you've recovered from your injuries or reached your coverage limit. You get this no matter who was at fault.
Other benefits of your PIP coverage include a percentage of your lost income if you're unable to work because of your injuries and a daily household subsidy.
You can receive these additional benefits for up to three years after the accident. If you haven't recovered by then, you're able to sue the driver who caused the accident for the excess amount.
When you file a PIP claim, you'll have to pay a deductible, which varies by company but is usually $300 or $500 per accident.
The Michigan auto insurance reforms allow drivers to choose from six PIP coverage limits, but some have stipulations:
PIP coverage options
-
Unlimited coverage per person per accident: This is the same coverage that was required in Michigan before the reforms and is available to all drivers. With unlimited coverage, drivers and their passengers receive reimbursement for reasonable and necessary medical expenses related to the accident, with no time limit.
- Up to $500,000 in coverage per person per accident | This option is available to all drivers.
- Up to $250,000 in coverage per person per accident | This option is available to all drivers. There's an option to exclude some or all of the drivers on the policy who have health insurance that covers auto injuries, with a deductible lower than $6,000.
- Up to $50,000 in coverage per person per accident | This option is only available to drivers who are enrolled in Medicaid and meet additional eligibility requirements.
- Opt out of PIP coverage | This option is only available to drivers who have Medicare Parts A and B and meet additional eligibility requirements.
When determining which coverage is best for you, check to see if your health insurance plan covers auto accident injuries. If your medical expenses are primarily covered by your health insurance, you only need to use PIP for costs your health insurance policy doesn't cover. If that's the case, you may be able to choose a lower PIP limit.
Property protection insurance
Property protection insurance (PPI) is unique to Michigan. PPI covers the costs to repair any collateral property damage you cause in an accident, up to $1 million per crash. This typically only covers stationary objects — for example, a light pole or building — and usually doesn't cover another driver's car unless it is parked on the side of a road when you run into it.
Residual bodily injury and property damage
Collectively known as residual liability insurance or BI/PD, bodily injury and property damage are "residual," because the state limits its drivers' right to sue due to the generous no-fault laws. Only under a few exceptions will this coverage come into play. When it does, your company will pay out, up to your policy's limits. If you don't have enough coverage, you may have to pay for damages yourself if you're taken to court.
Michigan law requires you to maintain a minimum of $50,000 of insurance coverage per injured person, $100,000 for two or more persons and $10,000 for property damage. You may see insurance companies refer to these limits in a split-limit format that looks like this: $50,000/$100,000/$10,000.
Michigan's basic residual property damage does not cover repairs to another car in an accident you cause, unless it is parked. It can only be used in the scenarios described below.
Optional car insurance coverages in Michigan
Apart from choosing higher limits of the required residual BI/PD coverage, here are a few unique optional coverages Michigan drivers may find helpful:
Limited property damage: Under the mini-tort law, when you are more than 50% at fault for a collision, the other driver can sue you for their car's damage. The most they may sue you for is $3,000, and you are covered for judgments up to that amount if you buy this coverage.
Collision: Typically, collision coverage takes care of your car's repair costs, regardless of fault, after you've paid your deductible. Michigan insurance companies may offer you the following types of collision coverage, with different scopes and premiums:
- Limited: Limited collision only pays for your vehicle's damage if you're less than 50% at fault.
- Standard: Standard collision covers you regardless of fault. You must always pay a deductible with this option.
- Broad form: Broad form collision costs the most out of the three options but requires the least amount of money out of pocket if you're in an accident. It pays for your damage regardless of fault and waives your deductible when you are less than 50% to blame.
Michigan drivers can also buy comprehensive car insurance, as well as towing and rental car coverage.
Michigan auto insurance reform
Under the Michigan insurance law reforms, drivers received an average reduction of 44% to 100% of the personal injury protection (PIP) portion of their car insurance premiums per year. Those who opted for less PIP coverage saw the greatest discount.
This analysis found that reductions to Michigan's PIP insurance requirements translated to savings of up to $1,771 per year.
These rate reduction estimates are based on eight filings from Michigan auto insurance companies, representing the insurance subsidiaries with the largest market shares in the state. While Michigan still has the highest minimum- and full-coverage car insurance costs, these reductions to PIP limits lowered premiums significantly.
PIP coverage | Average PIP premium | Estimated annual savings |
|---|---|---|
| Unlimited | $1,771 | None |
| $500,000 | $785 | $986 |
| $250,000 | $722 | $1,049 |
| $50,000 | $612 | $1,159 |
| None* | $0 | $1,771 |
Only available for drivers with qualifying health insurance coverage.
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There are some limitations to who can enroll in the lowest PIP levels.
Below is a list of annual rate reductions by city for a full-coverage policy. Savings were calculated by determining the cost of unlimited PIP coverage in each city and then subtracting the cost of lower PIP limits.
Estimated annual savings by Michigan city and PIP limit
City | $500,000 limit | $250,000 limit | $50,000 limit |
|---|---|---|---|
| Allen Park | $1,830 | $1,913 | $2,049 |
| Ann Arbor | $750 | $802 | $894 |
| Battle Creek | $902 | $955 | $1,048 |
| Bay City | $1,013 | $1,067 | $1,164 |
| Bedford | $1,041 | $1,089 | $1,172 |
Insurance companies are banned from using certain non-driving factors to set rates
The 2020 Michigan insurance law reforms prohibit auto insurance companies from using non-driving factors, such as credit scores, marital status, sex, education, occupation, homeownership or ZIP code, when setting insurance rates.
But the reforms don't completely eliminate the impact these personal details can have on auto insurance premiums. For instance, the law does not ban companies from territorial rating — apart from ZIP codes — to determine insurance costs. So where you live will continue to affect your premiums.
Catastrophic claims fees are reduced alongside PIP selections
Michigan drivers pay a portion of their premiums to the nonprofit Michigan Catastrophic Claims Association (MCCA), which repays companies after their policyholders make expensive lifetime medical claims under PIP.
The MCCA's fee was $220 before the law reforms took effect, but it has dropped to $90 for drivers who opt for full PIP coverage. Policyholders who select lower PIP limits won't have to pay any fee to the MCAA.
Limit to medical fees charged to auto insurance companies
Michigan's law reforms limit the amount that hospitals, doctors and other health care providers can charge for medical care covered by no-fault auto insurance. This attempts to address the increased costs for services that auto insurance companies have been charged under the previous system. High medical costs have been a contributing factor to the high cost of auto insurance in the state.
Driving without insurance
According to the Insurance Research Council, nearly 20% of Michigan drivers don't have car insurance. Driving without insurance is a misdemeanor in the state, and offenders can face up to $500 in fines, license suspension, and up to a year of jail time.
Attendant care
Under Michigan's no-fault insurance laws, when a person is injured in a car accident and can no longer perform daily living activities — like eating, getting dressed and bathing — independently, PIP coverage will pay for a nurse or family member to care for them.
The auto insurance reforms place a 56-hour limitation per week on the amount of family-provided care that insurance companies are required to cover. (Previously, family members were able to provide 24-hour care.) This limitation does not apply to professional nursing services.
Frequently asked questions
Can you sue another driver in Michigan?
For most accidents, your right to sue is limited in Michigan as part of the no-fault law's unlimited medical and economic loss benefits. There are only a few circumstances that would allow you to sue the negligent driver for pain and suffering (noneconomic loss, serious injuries or death, accidents involving non-Michigan residents, accidents outside of Michigan and mini torts covered under limited property damage.
Does Medicare cover auto accident injuries in Michigan?
Medicare will pay for covered medical services to drivers who opt out of PIP and have no other available coverage. However, that doesn't mean Medicare is a substitute for PIP insurance. Necessities like long-term and custodial care, household services, transportation to and from medical appointments and vehicle modifications may not be covered by Medicare.
Drivers with Medicare can also buy lower levels of PIP coverage. Once PIP limits are exhausted, they may be able to use Medicare benefits to pay for Medicare-covered services.
What is the cheapest auto insurance in Michigan?
Progressive offers the cheapest full-coverage car insurance for most Michigan drivers. At an average of $2,044 per year, Progressive's policies are 71% cheaper than the statewide average of $7,161. Auto-Owners Insurance, Frankenmuth Insurance and State Farm also offer competitive rates.
Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.
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