If you've ever gotten sticker shock from a Michigan auto insurance quote, you're not alone. For decades, Michigan had the most expensive car insurance in America—and it wasn't even close. The reason? A unique no-fault system that required everyone to carry unlimited medical coverage. But in 2020, everything changed. Michigan's insurance reform gave drivers choices for the first time in nearly 40 years, and those choices can save you hundreds or even thousands of dollars a year. Here's what you need to know about how Michigan's no-fault system works now, and how to pick the right coverage for your situation.
What Does No-Fault Insurance Actually Mean?
No-fault insurance sounds confusing, but the concept is actually pretty straightforward: when you're injured in a car accident, your own insurance company pays your medical bills and lost wages—regardless of who caused the crash. You don't have to wait for the other driver's insurer to accept liability, you don't have to prove fault, and you don't have to sue anyone to get your bills paid. Your insurance handles it.
This system is called Personal Injury Protection (PIP) coverage, and it's mandatory for all Michigan drivers. Think of it as your medical safety net after an accident. The trade-off? In exchange for this guaranteed coverage, your ability to sue the at-fault driver is limited—you generally can't go after them for pain and suffering unless your injuries meet a serious threshold called the "serious impairment of body function" standard.
The 2020 Reform: What Changed and Why It Matters
Before July 2020, every Michigan driver was required to carry unlimited lifetime medical coverage. If you were catastrophically injured in a car accident, your insurance would pay your medical bills forever—no caps, no limits. That sounds great in theory, but it came with a massive price tag. Michigan consistently ranked as the most expensive state for car insurance, with rates that were often double or triple the national average.
The 2019 reform law (which took effect in July 2020) changed that. For the first time, Michigan drivers can now choose their level of PIP medical coverage. Instead of unlimited-only, you now have five options: unlimited coverage, $500,000, $250,000, $50,000 (if you have Medicaid), or you can opt out entirely if you have Medicare Parts A and B. Insurance companies are required to offer significant discounts based on your choice—at least 45% off for the lowest coverage, down to at least 10% off if you stick with unlimited.
Has it worked? According to a December 2025 report by Milliman, Michigan auto insurance rates have decreased by 18% since the reform was enacted. That's real savings for drivers. But here's the catch: Michigan is still one of the most expensive states for car insurance. The average annual cost ranges from about $1,400 to over $2,600 depending on your coverage, compared to a national average of around $1,500.
Understanding Your PIP Coverage Options
Choosing your PIP level is the biggest decision you'll make when buying Michigan auto insurance. Here's what each option covers and who it's best for:
Unlimited coverage gives you lifetime medical benefits with no dollar limit. Michigan is the only state where this option still exists. It's expensive, but it's the gold standard if you want maximum protection. If you don't have great health insurance, or if the idea of a coverage cap makes you nervous, unlimited is worth considering. It's also the default—if you don't actively choose a lower level, you'll automatically get unlimited coverage.
$500,000 coverage is a middle ground that works for many people. It provides substantial protection for serious injuries while offering a 20% discount on your premium. This level makes sense if you have solid health insurance that would kick in after your PIP benefits are exhausted.
$250,000 coverage offers a 35% discount and can be a smart choice if everyone in your household has qualifying health insurance that covers auto accident injuries. You'll need to coordinate with your health insurer, but the savings can be substantial.
$50,000 coverage is only available if you're enrolled in Medicaid and your household members have other coverage. It comes with a 45% discount—the biggest savings available. If you qualify, this can make car insurance much more affordable.
Opting out is possible if you have Medicare Parts A and B, and all household members have qualifying coverage. This option can dramatically reduce your premium, but you're relying entirely on Medicare and your health insurance for accident-related medical bills.
What Your PIP Benefits Actually Cover
No matter which coverage level you choose, your PIP benefits cover more than just hospital bills. Here's what's included:
Medical expenses are covered up to your chosen dollar limit. This includes emergency room visits, surgery, physical therapy, prescription medications, and all necessary and reasonable medical care related to your accident. If you have unlimited coverage, there's no cap. If you chose $500,000, that's your maximum.
Lost wages are covered at 85% of your normal salary if you can't work due to accident-related injuries. This benefit lasts for up to three years or until you recover and return to work, whichever comes first. If you're self-employed or have irregular income, special rules apply, but you're still entitled to work loss benefits.
Attendant care services are covered if your injuries require help with daily activities like bathing, dressing, eating, or taking medication. This is particularly important for catastrophic injuries, and it's included in your PIP benefits—you don't pay extra for it.
Mileage and transportation costs are reimbursed when you travel to medical appointments, physical therapy, or other accident-related care. This includes mileage if you drive yourself, or taxi, bus, and rideshare fares if you need transportation.
What PIP doesn't cover is pain and suffering. That's a non-economic loss, and no-fault insurance doesn't pay for it. To get compensation for physical pain, emotional trauma, or loss of quality of life, you'd need to file a bodily injury claim against the at-fault driver—and that's only possible if your injuries meet Michigan's serious impairment threshold.
How to Choose the Right Coverage Level
The decision comes down to your health insurance situation and your risk tolerance. Here's a practical way to think about it: if you have excellent health insurance with low out-of-pocket maximums that covers auto accidents, you can probably feel comfortable with $250,000 or $500,000 of PIP. Your health insurance becomes your backup after PIP benefits are exhausted.
If your health insurance is mediocre—high deductibles, limited networks, or gaps in coverage—you might want to stick with unlimited PIP. The peace of mind is worth the extra premium, especially in a state where severe winter weather makes serious accidents more common.
If you're on Medicare or Medicaid, definitely explore the lower-cost options. The savings can be life-changing, and you're not giving up much protection since your government coverage already handles medical expenses. Just make sure everyone in your household meets the requirements—if even one person doesn't have qualifying coverage, you may not be eligible for the lower tiers.
One critical deadline to remember: you must notify your insurance company of any PIP claim within one year of your accident. Miss that deadline, and you could lose your right to benefits entirely, regardless of how serious your injuries are. After an accident, report it to your insurer immediately—even if you're not sure you'll need to file a claim.
Getting Started: Next Steps
If you're shopping for Michigan auto insurance or reviewing your current policy, the most important thing you can do is actively choose your PIP level. Don't just accept the default unlimited coverage without comparing what you'd save with a lower option. Get quotes at multiple levels, review your health insurance policy to understand what it covers after an auto accident, and do the math.
Talk to your insurance agent about your specific situation. Ask questions about how the different PIP levels would work with your health coverage. And don't forget that you can change your PIP level at renewal—you're not locked in forever. Michigan's no-fault system is complex, but the 2020 reform gave you the power to customize your coverage. Use it wisely, and you can get the protection you need at a price you can actually afford.
