What are the New Auto Insurance Laws in Michigan?

Staying updated with the changes in auto insurance laws is always something that we all need to do. Laws change so often, and it’s necessary to keep track, and stay updated with what’s new, especially to know how much coverage you need to legally drive. 

The ironic thing about Michigan’s auto insurance law is, it has been amended after more than 40 years. The changes in Michigan’s Auto Insurance Laws took place between 2019, and 2020, with most of the legal changes being effective from 2020.  

So, what are the new auto insurance laws in Michigan? And to what extent did they change in aspects of mandatory types of insurance, current auto insurance laws, state mandated coverage limits, and impact of the new laws on Michigan drivers.  

This article will explore the significant changes to Michigan's auto insurance laws that took effect in 2020 and point out the key differences in detail.

What are the New Auto Insurance Laws in Michigan?

There have been significant changes in Michigan’s new auto insurance laws which were introduced between 2019 to 2020. Most of these legal changes were effective from July 1, 2020. 

These changes have introduced new options for some insurance policies with significant changes in coverage limits. It has also reformed the rating factor for auto insurance companies to evaluate their customer and determine the insurance rates.  

As these changes were made for specific types of auto insurance, it is important to know the sweeping changes, which include the following.

PIP (Personal Injury Protection) Choice Options

Before the legal reformation in 2020, it was legally mandatory to get unlimited PIP coverage. But with the implementation of the new auto insurance laws, you have 4 different options to choose from which includes:

$250,000 Limit: This is the minimum PIP coverage that you must purchase, which will cover up to $250,000 of medical expenses for you, and your passengers, along with pedestrians affected by the accident. You can also go for the $250,000 limit PIP insurance if you have a non-medicare insurance plan which includes health insurance plans with more comprehensive coverage. 

$500,000 Limit: You can go for the $500,000 PIP insurance coverage; this will pay up to $500,000 per person for each accident. So, in the event of an auto accident you, your passengers, or any pedestrian will each get up to $500,000 for your medical expenses.

$50,000 Limit with Medicaid: You can only go for the PIP coverage of $50,000 if you, and spouse along with other household members are covered by Medicaid. So, in case of an accident you will get a PIP coverage of $50,000 per person, and the rest will be covered by Medicaid or any other health insurance policies that you have.

No Limit PIP Option or Unlimited Coverage: Although it’s no longer a mandatory requirement since the new auto insurance laws took effect in 2020, it is still the best form of protection for auto accidents. Especially as Michigan is a no-fault state, you will have to pay the medical bills from your own insurance policy, or out of your own pocket. To stay on the safe side, it’s always better to have adequate coverage that comes with unlimited PIP coverage.

Alternatives of PIP Choice Options

There is another drastic change in the new auto insurance law when it comes to PIP insurance policies. Now you have the option to opt out of PIP. Although it’s mandatory to have PIP insurance in Michigan, you can choose not to purchase it if you have the following insurance policies, or if you meet these requirements:

Qualified Health Coverage: If you have a more comprehensive health insurance policy that covers the default insurance requirements of $250,000 per person injured or killed, $500,000 per accident, or at least the minimum requirement of $50,000 per person, and $100,000 per accident, then you don’t need to get a PIP insurance. Usually, health insurance coverage that includes auto accidents in its policies have a higher insurance coverage than the default/minimum coverage limits, and that’s why it falls under this exception.

Medicare: If you’re part of the Medicare Part A, and Part B, then you can opt out of the PIP insurance. This is because Medicare part A will cover your hospital costs, and Medicare part B will cover medical expenses. But this option also has a substantial risk, there is no limit to the amount of out-of-pocket expenses that you will have to spend unless you have any other health insurance policies to cover it.

Bodily Injury Liability Coverage Changes

Despite being a no-fault state, Michigan has a high record for auto accidents in the USA. According to recent statistics, it was found that each year there are more than 312,000 traffic collisions in Michigan. In 2023, there were 287,953 car crashes in Michigan. 

So, due to its long record of having a high number of road accidents, drivers are held accountable for at-fault accidents with Michigan’s mini tort auto law. This makes Michigan a hybrid state, regardless of officially being a no-fault state. The bodily injury liability covers compensating the other driver, and the vehicle’s passengers for an auto accident where you are partially or totally at-fault.  

So, before the changes took place in 2020, it was legally required to carry bodily injury liability coverage of $20,000 per person, and $40,000 per accident. The new auto insurance law that’s effective from July 2020, requires you have bodily injury liability coverage of $250,000 per person, and $500,000 per accident. 

Alternatively, you have the option to purchase the minimum bodily injury liability insurance, which is $50,000 per person, and $100,000 per accident. But for that you will have to sign a form approved by the Director of Insurance and Financial Services. By signing this form, you agree to pay any additional medical expenses to the other driver, and the passengers of that vehicle if it exceeds the minimum coverage.

Mini-tort Law Changes   

The mini-tort law of Michigan is what makes it a hybrid state, whereas it’s officially a no-fault state. The mini tort law, or limited property damage liability, requires the at-fault driver to pay for a portion of the vehicle damage caused by the accident, up to a certain limit and it only covers vehicle damages. 

The mini tort law has been there before, and it has been reformed in 2020 with a change in the maximum recovery amount from $1000 to $3000. So, under the old mini-tort law you would have to compensate up to $1000 for accidents that you’re partially responsible for, and under the new law you will have to pay up to $3000.  

To help you understand how it works, here’s an example, let’s say you’re 75% at-fault for a car accident, so you will have to compensate for 75% of the damages, but this amount will not exceed the maximum limit of $3000. So, in this case, if the 75% is below, or equivalent to $3000 then you will have to pay that, and if it exceeds $3000 then you will just have to pay $3000.

Changes for Motorcycle Riders

There has been a drastic change in the way auto insurance is applied for motorcycle riders for accidents with other vehicles in Michigan. Before motorcyclists would get unlimited coverage with a no-fault insurance policy for their own vehicle.  

But ever since the new law has been implemented, motorcyclists will get the maximum coverage of the other driver’s insurance policy.  

For example, if you own a motorcycle, and if you get into a road accident with vehicle, then even after having unlimited coverage for your own vehicle, the coverage limit will be capped based on the other driver’s limit. So, if the other driver has a maximum coverage limit of $250,000, then your coverage limit will also be capped to $250,000.  

In this case, you will have to either compensate the additional amount from other insurance policies like collision insurance, or you need to pay any additional amount from your own pocket.

Rating Factor Changes

Based on the reformed auto insurance laws in 2020, insurance companies are now prohibited to use gender, marital status, credit score, educational qualifications, occupation, and ZIP codes to determine insurance rates.  

Apart from these driving records, age, insurance history, location, annual mileage, vehicle type, make and model, and other rating factors still apply for determining insurance premiums. Not to mention, this change could benefit certain groups of drivers who may have been unfairly penalized under the previous system.

What are the Current Mandatory Auto Insurance Laws in Michigan?

It is mandatory for you to have PLPD insurance in Michigan, which is Personal Liability, and Property Damage Insurance. Although Michigan is officially a no-fault state, due to the high number of frequent road accidents, it is compulsory for everyone to have PLPD insurance.  

So, what is PLPD insurance? PLPD insurance is liability insurance which covers compensation for bodily injury, vehicle and property damage to the other driver, and that vehicle’s occupants for an auto accident in which you are at-fault. Along with PLPD insurance, you must also have PIP insurance, uninsured and underinsured motor vehicle insurance.  

You are also required to have the default PLPD insurance coverage of 250/500/10, or the minimum coverage which is 50/100/10.  If you are looking forward to learning more about how PLPD insurance works, or if you would like to purchase one, you should look into a reliable PLPD Insurance Agency in Michigan. 

Aside from mandatory types of auto insurance with compulsory coverage limits, it is also a legal requirement to carry proof of your auto insurance. Failure to show proof of auto insurance is a legal offense and it can lead to substantial fines, and even jailtime.

Impact of New Laws on Michigan Drivers

While auto insurance is more expensive with the new laws in effect, it also has more options to save on insurance premiums. The previous insurance law required unlimited PIP coverage, whereas the new one has 4 different options which were discussed earlier.  

According to the experts, you can now save 44% to 100% on PIP (Personal Injury Protection) insurance depending on the auto insurance policies that you are going to purchase, whether it includes PIP insurance coverage of your choice, or any other alternative healthcare insurance policies.  

So, based on that you can save up to $1,771 per year on annual premiums, or more, depending on the options that you go with.  

The table below shows PIP coverage options, and how much you can potentially save on annual premiums.

Plus, there are additional benefits in the reformed auto insurance laws, especially the restrictions on insurance companies to determine auto insurance rates. This gives you increased accessibility to more affordable insurance premiums. The increase in mini tort law changes can also be beneficial to cover extra costs for at-fault accidents.

Penalties for Driving in Michigan Without Auto Insurance

It is legally mandatory for every vehicle owner in Michigan to have auto insurance. If you are caught driving without insurance in Michigan, your driver’s license may be suspended, and you must pay a substantial fine, and even face jailtime.  

If your license gets suspended, you will have to apply for S-22 certificate and purchase it to get your license reinstated.

Ending Remarks: Stay Updated with the New Auto Insurance Laws

It’s always important to stay updated with the auto insurance laws, this will not help you avoid legal complications, but it will also help you make more calculative decisions when it comes to choosing the right auto insurance policies.  

If you have read this far, you’re already aware of the reformations in auto insurance laws in Michigan, yet it is always best to consult with an auto insurance expert before making any purchase decisions. They will be able to suggest to you the best auto insurance policies based on the new laws, and of course particularly tailored to your needs. 

As an insurance agency based in Michigan, we have agents, and industry experts who are committed to provide legal advice, along with suggesting personalized auto insurance policies. So, if you need any help, contact us today for a free consultation and personalized insurance quote.

FAQ

What are the new rules for auto insurance in Michigan?

The new rules for auto insurance in Michigan mainly include changes in coverage limits which include 4 different options for PIP insurance, and additional default, and minimum coverage limits for PLPD insurance policies.  

What is the new PIP law in Michigan?

The new PIP law in Michigan allows customers to purchase PIP insurance coverage based on 4 different options which include $250,000 limit, $500,000 limit, $50,000 limit with Medicaid, and No Limit PIP Option or Unlimited Coverage. The previous law required to have lifetime PIP insurance with unlimited coverage only, this option is still there but now you can opt for cheaper options.  

Who pays for car damage in a no-fault state in Michigan?

Although Michigan is officially a no-fault state, if you get involved in an at-fault car accident with another driver then you’re liable to compensate the other driver for bodily injuries, and property damage. This applies under the mini-tort law in Michigan, which has a maximum limit of up to $3000 since the reformation in 2020.  

Is auto insurance required in Michigan?

Yes, every vehicle owner in Michigan must have auto insurance. If you’re found owning a vehicle or driving around with auto insurance, then you may have to pay substantial fines and serve jailtime. If you have a driving license that may get suspended.