Michigan auto insurance, explained choice by choice

How does Michigan no-fault auto insurance work?

Under Michigan’s no-fault system, your own policy’s personal injury protection (PIP) pays your medical expenses, lost wages and replacement services after an auto accident, regardless of who caused it. Since the 2019 reform took effect in 2020, drivers choose their PIP medical coverage level instead of receiving unlimited coverage automatically. Liability coverage still protects you when you are sued for injuring someone, and that lawsuit exposure grew under the reform.

Required and key coverages on a Michigan policy:

What PIP medical coverage level should I choose in Michigan?

Michigan drivers choose PIP medical coverage of unlimited, up to $500,000, up to $250,000, up to $250,000 with exclusions for household members who have qualifying health coverage, up to $50,000 for Medicaid enrollees, or opting out entirely if you have Medicare Parts A and B. The right level depends on your health insurance, how it treats auto injuries, and your household’s ability to absorb long-term care costs. A serious injury can require lifetime care, which is why the choice deserves more than a price comparison.

Questions we answer with you before you select a level:

• Does your health plan cover auto-accident injuries, and with what deductibles and network limits?
• Who in the household is covered under which health plan, including students and retirees?
• How would long-term attendant care, home modifications and rehabilitation be paid above your PIP limit?

Why do Michigan drivers need higher liability limits since the reform?

When an injured person’s medical expenses exceed the PIP level they selected, they can sue the at-fault driver for the difference. That shifted part of the catastrophic-injury risk from the no-fault system to individual drivers’ liability coverage. Michigan’s default liability limits are $250,000 per person and $500,000 per accident, and most households with assets to protect should carry those limits or higher, with an umbrella above them.

How should luxury and collector vehicles be insured?

Collector and exotic vehicles are best insured on agreed-value policies, which pay a value set in advance instead of the depreciated actual cash value a standard auto policy pays. Collector policies usually limit annual mileage and require secure storage and a separate everyday vehicle, in exchange for broader coverage and lower premiums. Daily-driven luxury vehicles need attention to replacement-cost options, original-manufacturer parts, and gap coverage on leased or financed cars.

How do teen drivers affect a family’s auto insurance?

Adding a teen driver raises premium and, more importantly, raises the household’s liability exposure, because inexperienced drivers have higher accident rates. Every licensed household member must be listed, and vehicles they drive regularly should be assigned to them appropriately. Teen drivers are also the most common reason families need an umbrella policy, and the umbrella carrier will require every household driver to be disclosed.

Ways families manage the risk: telematics and driver-monitoring programs (often with discounts), good-student and away-at-school credits, choosing safer vehicles for new drivers, and reviewing limits the day a permit becomes a license.