Michigan No-Fault Auto Insurance: Complete Producer Guide

Michigan's no-fault auto insurance system is one of the most distinctive — and most complex — in the country. After nearly 40 years of mandatory unlimited Personal Injury Protection, Michigan enacted sweeping reform through Public Acts 21 and 22 of 2019, fundamentally restructuring PIP choice, bodily injury requirements, and medical fee schedules with most changes effective July 2, 2020. For Michigan P&C producers, genuine mastery of this system isn't optional — it's the foundation of credible auto insurance practice and the most heavily tested Michigan-specific topic on the Property and Casualty licensing exam.

Here's everything Michigan producers need to know about the no-fault system.

Michigan's No-Fault System — The Basics

Michigan is a no-fault state, meaning each driver's own insurance pays their medical expenses and certain other costs regardless of who caused the accident. This contrasts with at-fault (tort) states where the at-fault driver's liability coverage pays the other party's damages.

Michigan is classified as a "modified no-fault" state with a verbal injury threshold — one of the most restrictive in the country. Under the verbal threshold:

You can only sue the at-fault driver for non-economic damages (pain and suffering) if your injuries meet specific statutory criteria:

Death

Serious impairment of body function (affects important body function; objectively manifested)

Permanent serious disfigurement

Unlike monetary threshold states (Florida, Massachusetts, etc.) where exceeding a dollar amount unlocks the right to sue, Michigan's verbal threshold requires meeting qualitative injury standards — considerably harder to satisfy for minor to moderate injuries.

Pre-Reform vs. Post-Reform

Pre-Reform (before July 2, 2020):

All Michigan drivers required to carry unlimited PIP — no cap on lifetime medical benefits

Among the highest auto insurance premiums in the country

Michigan was consistently the most expensive state for auto insurance

Post-Reform (effective July 2, 2020):

Mandatory unlimited PIP replaced with tiered PIP choice system

Drivers must select a PIP level (or unlimited remains the default)

Medical fee schedule implemented (Medicare-based rates)

Attendant care limits introduced

New bodily injury liability requirements

Reform legislation: Public Acts 21 and 22 of 2019, signed by Governor Whitmer on May 30, 2019.

The Five PIP Coverage Tiers

Michigan now requires drivers to choose from five PIP coverage levels:

Tier 1 — Unlimited:

Covers all reasonable and necessary medical expenses with no lifetime cap

Default if no selection is made

Requires participation in MCCA for catastrophic claims above $635,000 threshold (2025)

Required PIP premium reduction: average 10%+ vs. prior unlimited rates

Tier 2 — $500,000:

Covers up to $500,000 in medical benefits per person per accident

Available to anyone purchasing no-fault insurance

Required PIP premium reduction: average 20%+ vs. prior unlimited rates

Tier 3 — $250,000:

Covers up to $250,000 in medical benefits per person per accident

Available to anyone purchasing no-fault insurance

Required PIP premium reduction: average 35%+ vs. prior unlimited rates

Tier 4 — $50,000 (Medicaid Option):

Covers up to $50,000 in medical benefits

Restricted availability: Only for drivers enrolled in Medicaid whose spouse and household relatives are also covered by Medicaid, have other qualifying health insurance, or have separate PIP through another policy

Required PIP premium reduction: average 45%+ vs. prior unlimited rates

Tier 5 — Opt-Out (Medicare/Qualifying Health Coverage):

No PIP medical benefits

Restricted availability: Only if driver AND spouse AND household relatives meet specific criteria including Medicare Parts A and B, or qualifying health coverage (QHC) that doesn't exclude or limit auto accident injuries and has annual deductible of $6,000 or less

Strict notification requirements if qualifying coverage is ever lost

Very low premium (no PIP coverage charged)

All accident medical bills processed through Medicare or qualifying health plan

Default: If no PIP selection is made and no selection form is returned, unlimited PIP is the default.

DIFS PIP and BI Choice Forms

DIFS published standardized forms for PIP selection and Bodily Injury limit selection (Bulletin 2025-07-INS). Producers must use DIFS-issued forms:

PIP Choice Form: Driver must sign to select Tier 4 ($50,000 Medicaid) or Tier 5 (opt-out). Unlimited, $500,000, and $250,000 don't require a signed form — but Tier 4 and 5 do require specific eligibility confirmation.

Bodily Injury Choice Form: Used when drivers select the lower BI limit option ($50,000/$100,000) rather than the default $250,000/$500,000.

Bodily Injury Liability — Post-Reform Requirements

Michigan's no-fault reform also substantially changed bodily injury (BI) liability requirements:

Post-Reform BI options (policies issued/renewed after July 2, 2020):

Default BI limits: $250,000/$500,000

Companies must issue policies at these limits unless the choice form is returned

These became the mandatory default as part of the reform

Lower BI option: $50,000/$100,000

Available by written election

Must return the DIFS BI choice form

Standard expressed as 50/100/10:

$50,000 BI per person / $100,000 per accident / $10,000 property damage

The $10,000 PD applies to out-of-state incidents only (Michigan uses Property Protection Insurance for in-state property damage)

Important: Michigan's property damage liability primarily applies to accidents outside Michigan. In-state property damage is handled through Property Protection Insurance (PPI).

Property Protection Insurance (PPI) — Michigan-Unique

Property Protection Insurance (PPI) is a Michigan-specific coverage that applies to property damage caused within Michigan:

What PPI is:

Covers damage your vehicle causes to tangible property within Michigan

Limit: $1,000,000 per accident

Required as part of Michigan no-fault

What PPI covers:

Buildings, structures, and fixed property

Properly parked vehicles on the road

Generally does NOT cover moving vehicles (handled through liability)

Why PPI exists: Because Michigan's no-fault system removes most property damage claims from liability (each party pays their own), PPI covers damage you cause to stationary property (light poles, buildings, parked cars) within Michigan.

Michigan Catastrophic Claims Association (MCCA)

The Michigan Catastrophic Claims Association (MCCA) is a mandatory joint underwriting association:

What MCCA does:

Reimburses no-fault auto insurers for catastrophic PIP claims above a set threshold

Current threshold: $635,000 (2025, subject to annual adjustment)

All Michigan auto insurers must be MCCA members

Annual per-vehicle assessment charged to policyholders

How MCCA works with reform:

Policies issued/renewed after July 1, 2020 with unlimited PIP: MCCA reimburses above $635,000

Policies issued/renewed before July 2, 2020 with unlimited PIP: MCCA continues paying unlimited catastrophic claims under the old system

MCCA assessment: Added to every Michigan auto insurance policy as a per-vehicle fee. The amount is set annually by MCCA.

Post-Reform Medical Fee Schedule

Effective July 1, 2021, Michigan implemented a Medicare-based fee schedule for medical services provided to auto accident victims:

Fee schedule structure:

Healthcare providers reimbursed at Medicare-based rates

Non-Medicare services: 55% of 2019 rates

Annual CPI adjustments (DIFS publishes annual bulletins)

Service year runs July 2 through July 1 of the following year

Applicable schedule: Medicare fee schedule in effect March 1 of the service year

Attendant care limits:

56 hours per week maximum for family-provided in-home care (effective July 1, 2021)

Applies to both old and new policies going forward (though court challenges have affected application to pre-reform policies)

Michigan Assigned Claims Plan

For auto accident victims without PIP coverage (uninsured, excluded household members, etc.):

Michigan Assigned Claims Plan:

Assigns an insurer to handle the claim

Coverage cap: $250,000 medical benefits

Not a substitute for having your own PIP coverage

Residual Liability Insurance

Michigan's no-fault system includes residual liability insurance (bodily injury and out-of-state property damage):

Because Michigan limits lawsuits to serious verbal threshold injuries, liability insurance is primarily "residual" — it comes into play:

When you cause an accident outside Michigan

When you cause a verbal-threshold serious injury within Michigan

When you cause death

Given the verbal threshold limitation on lawsuits, Michigan liability insurance functions differently than in at-fault states.

UM/UIM: Not Mandatory in Michigan

Uninsured/Underinsured Motorist coverage is NOT mandatory in Michigan. Unlike North Carolina (where UM/UIM is mandatory and cannot be waived), Michigan does not require UM/UIM.

However, Michigan does have substantial uninsured driving rates — industry sources estimate approximately 1 in 5 Michigan drivers is uninsured, particularly in the Detroit metro area. Recommending UM/UIM coverage to clients is prudent given Michigan's uninsured driver reality.

Producer Obligations in No-Fault Practice

Michigan producers selling auto insurance must:

Present and explain the PIP choice tiers. Clients cannot make informed choices without understanding what each tier means for their coverage.

Use DIFS-approved choice forms. DIFS publishes standardized PIP choice and BI choice forms that must be used — not ad hoc forms.

Explain the verbal injury threshold. Clients selecting lower BI limits need to understand when liability coverage activates.

Explain MCCA assessment. The per-vehicle MCCA fee appears on every policy — clients ask about it.

Address qualified health coverage requirements for opt-out. Tier 5 opt-out has very specific eligibility requirements — confirming eligibility before recommending this option.

Document PIP and BI elections. Maintain records of client elections.

Notify clients of coverage changes. If qualifying health coverage for Tier 5 opt-out is lost, strict notification requirements apply.

No-Fault Fraud: A Major Michigan Issue

Michigan's no-fault system has experienced substantial fraud:

DIFS Fraud Investigation Unit received 3,789 fraud reports between July 1, 2023 and June 30, 2024. Of those, 99% were insurance-related and 50% involved auto and no-fault claims.

Common no-fault fraud schemes:

Staged auto accidents

Phantom injuries (claiming injuries from accidents that didn't produce them)

Provider billing fraud (inflating treatment bills)

Runner schemes (soliciting accident victims for unnecessary treatment)

Family care fraud (billing for attendant care not actually provided)

Producer responsibility: Recognize red flags in client applications and claims. Report suspected fraud to DIFS's FIU.

5 Frequently Asked Questions

• What changed in Michigan's no-fault reform effective July 2, 2020? Public Acts 21 and 22 of 2019 replaced mandatory unlimited PIP with a tiered PIP choice system (unlimited, $500,000, $250,000, $50,000 Medicaid, opt-out), implemented a Medicare-based medical fee schedule, introduced attendant care limits, and established higher default BI limits ($250,000/$500,000).
• What is Michigan's default if a driver doesn't select a PIP level? Unlimited PIP is the default if no selection is made. The driver must actively choose and document a lower tier.
• What is the MCCA and why do policyholders pay an assessment? The Michigan Catastrophic Claims Association reimburses no-fault insurers for catastrophic PIP claims above $635,000 (2025). The per-vehicle MCCA assessment funds this reinsurance pool and appears on every Michigan auto policy.
• What is Property Protection Insurance (PPI)? PPI is Michigan-specific coverage paying up to $1,000,000 for property damage you cause within Michigan. It covers damage to buildings, structures, and properly parked vehicles — replacing the property damage liability function that other states use.
• Is UM/UIM coverage required in Michigan? No. Michigan does not mandate uninsured/underinsured motorist coverage. However, given Michigan's high uninsured driver rates — particularly in Detroit metro — UM/UIM is strongly recommended for clients.

Serve Michigan Auto Clients With Genuine Expertise

Michigan's no-fault system rewards producers who understand it deeply. At JustInsurance, our Michigan prelicense and CE courses provide comprehensive no-fault coverage including reform details, PIP tier implications, MCCA, and producer obligations.

Enroll today and develop the Michigan auto insurance expertise clients need.