No-Fault Auto Insurance

Michigan’s No-Fault System — An Overview

Chapter 31 of the Michigan Insurance Code establishes Michigan’s mandatory no-fault automobile insurance system. Originally enacted in 1972 and substantially reformed in 2019 (Public Acts 21 and 22), the no-fault system requires that every owner or registrant of a motor vehicle required to be registered in Michigan maintain certain minimum insurance coverages. In exchange for these mandatory coverages, the system restricts the insured’s right to sue for ordinary negligence in most circumstances.

The Three Required Coverages

Every Michigan auto insurance policy must include three distinct coverages:

• Personal Protection Insurance (PIP): Pays for the insured’s own medical expenses and work loss following a car accident, regardless of fault.
• Property Protection Insurance (PPI): Pays for damage the insured’s vehicle causes to other people’s property in Michigan (not other vehicles on a public highway).
• Residual Liability Insurance (RLI): Provides liability protection when the insured causes death or serious impairment of body function to another person.

Important to Know!

This three-part mandatory structure is unique to Michigan and is among the most comprehensive no-fault systems in the United States. Producers must be fluent in explaining each component to clients.

Personal Protection Insurance (PIP) — 2019 Reform Tiers

Before 2019, Michigan provided unlimited lifetime PIP benefits. The 2019 reforms created a tiered benefit election system. For policies issued or renewed after July 1, 2020, the named insured must make an affirmative written election from the following options:

• Unlimited (traditional unlimited lifetime medical benefits)
• $500,000 per person per accident
• $250,000 per person per accident
• $250,000 with exclusion of a household member who has qualifying health coverage
• $50,000 (available only to Medicaid recipients)
• PIP opt-out (available only to named insureds and spouses enrolled in both Medicare Parts A and B)

Producer Obligation: Producers selling or renewing auto policies must offer all lawful PIP coverage options and must ensure the insured makes an affirmative written election. Failure to document the election may expose the producer to liability if the insured later claims they did not understand their coverage level.

Attendant Care and Benefit Limits

PIP benefits cover allowable expenses for care, recovery, and rehabilitation reasonably necessary as a result of the accident. Under the 2019 reforms:

• Attendant care provided by family members is capped at 56 hours per week for policies with limits below the unlimited tier
• Insurers must offer an attendant care rider for coverage in excess of the applicable limit
• Producers should understand these caps so they can advise clients on whether a higher PIP tier or a rider is appropriate

Property Protection Insurance (PPI)

PPI pays up to $1,000,000 for damage that a Michigan-insured vehicle causes to tangible property owned by others in Michigan, with an important exception:

Exception: PPI does not cover damage to other vehicles in accidents on a public highway. Damage to other vehicles on a public highway must be addressed through collision coverage or through residual liability if the at-fault driver has adequate limits. The $1,000,000 PPI limit is set by statute and is not elective. :::

Residual Liability Insurance (RLI) and the Verbal Tort Threshold

RLI protects the insured when they are liable for causing death, serious permanent disfigurement, or serious impairment of an important body function in an automobile accident. Michigan’s verbal tort threshold means that injured persons can sue in tort only for these serious injury categories — not for minor injuries.

Minimum RLI limits effective July 1, 2020:

• $250,000/$500,000 bodily injury per person/per accident
• $10,000 property damage

Important for Producers: Recommending only the statutory minimum RLI limits may be inadequate for many clients. In serious accident cases, verdicts can far exceed minimum limits, leaving the insured personally liable for the excess. Producers should document their discussion of higher limits and obtain a signed waiver when a client insists on minimum limits. :::

Key Definitions

Definitions

PIP (Personal Protection Insurance)

Pays the insured’s own medical, rehabilitation, and work-loss benefits after an auto accident, regardless of fault.

PPI (Property Protection Insurance)

Pays up to $1,000,000 for damage caused by the insured’s vehicle to another’s property in Michigan (not other vehicles on a public highway).

RLI (Residual Liability Insurance)

Covers the insured’s legal liability for serious injury or death caused to others in an auto accident.

Verbal tort threshold

Michigan’s standard limiting tort lawsuits after auto accidents to cases involving death, serious permanent disfigurement, or serious impairment of an important body function.

PIP opt-out

The election available only to named insureds and their spouses who are enrolled in both Medicare Parts A and B to waive PIP coverage entirely.