Auto Insurance Laws in Michigan: 2020 Reforms and Current Requirements

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. These and other major legal reforms resulted in significant savings for Michigan drivers — more than $1,000 on average, according to our calculation.

Michigan law now requires the following minimum insurance limits:

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/$100,000 per accident
Residual property damage liability$10,000 per accident

We analyzed the new laws and how they could lower your premiums.

Current Michigan car insurance requirements

Michigan requires every motorist to carry car insurance with a minimum level of coverage.

Under Michigan's no-fault law, insurers cover the reasonable and necessary medical expenses for drivers and their passengers injured in an accident, regardless of fault. As a result, the state’s drivers have some of the highest auto insurance costs nationwide.

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 driver claims medical expenses from their own PIP insurance first, there is a limited right to sue in Michigan, so only the most serious cases make it to court. If you are at fault in a serious accident, residual liability insurance covers the other parties' excessive property damage and medical costs.

No-fault insurance

Michigan is one of 12 no-fault states in the country. Under no-fault insurance laws, drivers who are hurt in a car accident make a claim with their own car insurance company, regardless of who caused the accident.

This process helps drivers recover their economic losses with as little downtime as possible. It also limits court proceedings because accident victims don't need to prove the fault of another party 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 are no longer physically recovering or rehabilitating for injuries from an accident or have reached your coverage limit, whether or not it was your 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 may receive these additional benefits for as long as three years after the accident, in certain cases. After three years, accident victims who have not recovered are able to sue the driver who caused the accident for the excess amount.

When you file a PIP insurance claim, you will have to pay a deductible, which is usually $300 or $500 per accident and varies by insurer.

The new Michigan auto insurance laws allow drivers to choose from six PIP coverage limits, however some options carry stipulations:

PIP coverage options

  • Unlimited coverage per person per accident: This is the same coverage that all drivers in Michigan were required to carry prior to 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 for their lifetime.
  • 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. However, policyholders have the option to exclude some or all of the drivers on their policy if they have a health insurance policy 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 with no PIP coverage | This option is only available to drivers who have Medicare Parts A and B and who meet additional eligibility requirements.

When determining which coverage option is the best for you, check to see if your health insurance plan covers auto accident injuries. If so, you can choose to coordinate your car insurance with your health insurance coverage for a lower PIP premium. In other words, when your medical expenses are primarily covered by your health insurance, you only need to use your PIP insurance for costs that your health insurance policy doesn't cover, so you may be able to choose a lower PIP limit.

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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 a total of $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 by 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 covers the other driver’s injuries and property damage costs due to an accident you cause.

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 insurers refer to these limits in a split-limit format that looks like this: $50,000/$100,000/$10,000.

In Michigan, BI and PD are "residual" because the state limits its motorists’ 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 insurer 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'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 certain scenarios, which we've 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 Michigan coverages that 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 the other driver may sue you for under the reformed mini-tort law 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 have paid your deductible. Michigan insurers may offer you a choice of the following types of collision coverage, with different scopes and premiums:

  • Limited: Limited collision only pays for your vehicle’s damage when you are less than 50% at fault for the crash.
  • Standard: Standard collision covers you regardless of who is at 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 involved in an accident. This coverage pays for your damage regardless of fault and waives your deductible when you are less than 50% to blame.

Michigan drivers can also purchase comprehensive car insurance, as well as towing and rental car coverage.

Michigan auto insurance reform

According to our analysis, under the new Michigan insurance law all drivers received a reduction of 44% to 100% to the personal injury protection (PIP) portion of their car insurance premiums per year, on average — with those who opted for less PIP coverage seeing the greatest discount in rates.

Our 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 insurers, 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 policyholder's PIP limits lowered premiums significantly.

PIP coverage
Average PIP premium
Estimated annual savings
Unlimited$1,771None
$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 that affect who can enroll in the lowest PIP coverage levels.

Below, we have compiled a list of annual rate reductions by city for a full-coverage policy. We calculated these savings by determining the cost of unlimited PIP coverage in each city, 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
Show All Rows

Insurers are banned from using certain non-driving factors to set rates

The 2020 Michigan insurance law reform prohibits auto insurers from using non-driving factors such as credit scores, marital status, gender, education, occupation, homeownership or ZIP code when setting insurance rates.

However, the new law does not completely eliminate the impact that these personal details can have on auto insurance premiums in Michigan. For instance, the law does not ban insurers from territorial rating — apart from ZIP codes — to determine insurance costs, so where you live will continue to impact your premiums.

Catastrophic claims fees are reduced alongside PIP selections

Michigan drivers pay a portion of their premiums to the Michigan Catastrophic Claims Association (MCCA). The association is a reinsurance organization that repays insurers after their policyholders make expensive lifetime medical claims under the PIP portion of a policy.

The MCCA’s fee was $220 before the law change took effect, but it has dropped to $86 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 insurers

Michigan's new law limits the amount that hospitals, doctors and other health care providers can charge insurers for medical care covered by no-fault auto insurance. This provision attempts to address the increased costs for services that these providers have charged auto insurance companies under the current 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 Michigan, and offenders are subject to fines, a 30-day license suspension, a driver responsibility fee, court costs and up to a year in prison.

Before the new car insurance laws took effect, uninsured drivers were also subject to additional fees and restrictions before they could purchase an insurance policy. Beginning on July 2, 2020, there is an 18-month amnesty period, during which insurance companies can not charge a reinstatement fee, increase the premium or limit the coverage available due to a lapse in coverage.

Attendant care

Under Michigan's no-fault insurance laws, when a car accident victim is injured and can no longer perform daily living activities — like eating, getting dressed and bathing — PIP coverage will pay for a nurse or family member to care for the accident victim.

The new auto insurance laws place a 56-hour limitation on the amount of family-provided care that insurance companies are required to pay for. Previously, family members were able to provide 24-hour care to accident victims. 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/economic loss benefits. There are only a few circumstances that would allow you to sue the negligent driver for pain and suffering (non-economic 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 Medicare-covered medical services to drivers who opt out of PIP medical benefits and have no other available coverage. However, that doesn't mean that Medicare is a substitute for purchasing 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 a Medicare policy.

Drivers with Medicare can also purchase lower levels of PIP coverage. Once they exhaust their PIP limits, 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 $1,522 per year, Progressive's policies are 65% cheaper than the statewide average of $4,356. Auto-Owners, Frankenmuth and State Farm also offer competitive rates.

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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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