Auto Insurance Requirements in Michigan

Auto Insurance Requirements in Michigan

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On July 2, 2020, Michigan eliminated the mandate for unlimited personal injury protection (PIP) on all auto insurance policies. These and other major reforms resulted in significant savings for Michigan drivers — over $1,000 on average, according to our calculation.

Minimum coverage in Michigan now requires the following 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 and $100,000 per accident
Residual property damage liability$10,000 per accident

Read on to learn more about how these reforms work and how they can lower your premiums.

Auto insurance reform in Michigan

Under the 2020 law, all Michigan drivers received a reduction of 44% to 100% in the PIP portion of their premiums per year, on average — with those who opted for less PIP coverage seeing the greatest discount in premiums.

Our analysis found that reductions to Michigan's PIP 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 share in the state. While Michigan still has the highest minimum- and full-coverage car insurance costs, these reductions to a 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 drivers with qualifying health insurance coverage.

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There are some limitations, however, that affect who can enroll in the lowest PIP coverage levels:

  • PIP coverage of $50,000 is only available for those who are enrolled in Medicaid and share a household with someone who has a separate car insurance policy, Medicaid or health insurance that could cover injuries resulting from an accident.
  • Waiving PIP medical coverage entirely is only available to those enrolled in Medicare who share a household with someone who has a car or health insurance policy that could cover injuries resulting from an accident.

Below, we share 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
Burton$1,234$1,307$1,437
Clinton$782$843$956
Dearborn$2,237$2,396$2,702
Dearborn Heights$1,780$1,900$2,115
Detroit$2,430$2,604$2,923
East Lansing$622$669$758
Farmington Hills$939$1,010$1,137
Show All Rows

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

The 2020 legislation 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 for Michigan drivers.

However, the legislation does not completely eliminate the impact that these personal details, such as location and credit history, 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 — what's covered by the PIP portion of one's policy.

The MCCA’s fee was $220 before the law change took effect, but it's since dropped from $100 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.

Medical providers are limited in what they can charge auto insurers

This bill 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.

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, drivers have the strongest first-party protections and benefits compared to elsewhere in the United States, and as a result, some of the highest rates nationwide. It was designed this way in part to help residents recover their economic losses with as little downtime as possible and to limit court backlogs.

A valid Michigan insurance policy includes personal injury protection and property protection insurance. These two coverages account for all of your medical expenses and most of your property damage liability from an accident.

Michigan also requires a minimum amount of residual liability coverage. Because every driver claims from their own PIP first, and there is a limited right to sue, only the most serious or outlying cases make it to court, which the residual liability would cover.

  • Personal injury protection (PIP): pays your medical bills until you're done with rehab or recovery, as well as wage loss and replacement services for three years after the accident.
  • Property protection insurance (PPI): covers up to $1 million for any collateral damage to stationary property.
  • Residual bodily injury and property damage: covers the other party's medical bills and car repairs, under limited circumstances.

Personal injury protection (PIP): PIP in Michigan will cover your medical expenses until you are no longer physically recovering or rehabilitating for injuries from any given accident, whether or not it was your fault. It's the most generous coverage, since there is no ceiling to the amount of coverage you can receive. Other benefits of your PIP include a percentage of your lost income (in case you cannot 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.

Most insurers will ask you to bear a certain amount of costs before they step in — also known as a deductible amount, which is usually $300 or $500 per accident and varies by insurer. Furthermore, if your health insurance plan covers auto accident injuries, 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 (first) covered by your health insurance, your PIP coverage only comes in for costs not covered, and so your premium will decrease accordingly.

Property protection insurance (PPI): Unique to Michigan motorists, 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 — examples include a corner of the building or a light pole that your car crashed into — and usually doesn’t cover another driver’s car unless it is parked by the side of a road when you run into it.

Bodily injury and property damage (residual BI/PD): Collectively known as residual liability insurance, bodily injury and property damage cover the other driver’s injuries and property damage costs, respectively, from an accident you cause.

You must always at least be covered for up to $50,000 per injured person and a total of $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 in exchange for the generous no-fault benefits. Only under a few exceptions will this coverage come into play. However, when it does, your insurer will pay out up to your policy's limits. If you are not sufficiently covered, your assets will be on the hook for the rest in a lawsuit.

Another complication is that 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 accessed in certain scenarios, which we've described below.

Optional car insurance coverage 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 (covered below), 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 mini-tort law is $1,000, and you are covered for judgments up to that amount if you buy this coverage.

Collision: Typically, collision will cover your car’s repair costs regardless of fault, after you have paid some portion of the costs equal to the deductible amount you’ve chosen. 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 will cover you regardless of who is at fault. You must always choose a deductible with this option.
  • Broad form: Broad form collision costs the most out of the three options but asks for the least out of pocket. 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. However, these coverages operate the way they do in other states.

Your right to sue

For most accidents, your right to sue is limited in Michigan as part of the no-fault law's unlimited medical/economic loss benefits. You are almost never in a situation to sue the negligent driver for pain and suffering (non-economic loss), except under several circumstances:

  • Serious injuries or death: If someone in your car is seriously injured or permanently disfigured or dies from the accident, you or his or her family member may sue the negligent driver.
  • Accidents involving non-Michigan residents: When you are involved in an accident with a non-Michigan resident, he or she is not subject to the Michigan no-fault law, and so will not be limited in their right to sue, unless that is also the case in their resident state.
  • Accidents outside of Michigan: If you get into an out-of-state accident where there is no limit to sue, the other driver may sue you.
  • Mini-tort: If the other driver believes you are more than 50% at fault for an accident, he or she may sue you for up to $3,000 for vehicle damage. This is referred to as the "mini-tort" law, and Michigan insurers have a specific coverage — known as limited property damage — for it.

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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