Michigan has one of the most complex auto insurance systems in the country. Our unique no-fault law — significantly overhauled in July 2020 — means Michigan drivers face choices and coverage rules that don't exist anywhere else. Understanding the terminology is the first step to making smart coverage decisions.
Michigan-Specific Note: Michigan's No-Fault Insurance Act (MCL 500.3101 et seq.) was substantially reformed in 2019, with the most significant changes taking effect July 2, 2020. PIP coverage tiers, minimum liability limits, and the MCCA surcharge structure all changed. All definitions below reflect current Michigan law as of 2025.
Michigan No-Fault System
- No-Fault Insurance
- Michigan's auto system (MCL 500.3101 et seq.) under which each driver's own insurer pays their medical and wage-loss benefits after an accident regardless of fault. Overhauled in 2019; major changes effective July 2, 2020.
- Personal Injury Protection (PIP)
- No-fault benefit covering medical expenses, wage loss (up to 85% of net income), replacement services, and funeral expenses for the insured and household members injured in an auto accident. Michigan now offers tiered PIP options.
- PIP — Unlimited
- Provides lifetime, unlimited medical coverage. Previously mandatory for all Michigan drivers; now optional but remains the most comprehensive protection available.
- PIP — $500,000 Limit
- Caps PIP medical at $500,000 per person per accident. A lower-cost option for insureds with comprehensive employer health insurance.
- PIP — $250,000 Limit
- Caps PIP medical at $250,000. Can be selected with a PIP medical exclusion if the insured has qualifying health coverage that will act as primary.
- PIP — $50,000 Limit
- Available only to Medicaid-eligible insureds. Medicaid becomes the primary payer after the PIP limit is exhausted.
- PIP Opt-Out (Medicare)
- Drivers covered under both Medicare Parts A and B may opt out of PIP medical coverage entirely, eliminating that portion of the premium.
- MCCA (Michigan Catastrophic Claims Association)
- State-mandated association that reimburses insurers for PIP medical claims exceeding a set threshold (currently $600,000). Every Michigan insurer must be a member.
- Tort Threshold / Residual Liability
- Under Michigan no-fault, an injured party may sue the at-fault driver for non-economic damages only if the injury meets the serious impairment threshold under MCL 500.3135.
- Mini-Tort
- Allows a Michigan driver to recover up to $3,000 from an at-fault driver for vehicle damage not covered by the driver's own collision insurance.
Liability Coverage
- Bodily Injury Liability (BI)
- Pays for injuries caused to others when the insured is at fault. Michigan minimums (as of 2020) are 50/100 — $50,000 per person and $100,000 per accident.
- Property Damage Liability (PD)
- Pays for damage the insured causes to another person's property. Michigan minimum is $10,000.
- Split Limits
- Liability expressed as three numbers: bodily injury per person / bodily injury per accident / property damage per accident (e.g., 100/300/100).
- Combined Single Limit (CSL)
- A single liability limit that applies to both bodily injury and property damage combined.
Physical Damage Coverage
- Collision Coverage
- Pays for damage to the insured's vehicle caused by a collision with another vehicle or object, or by the vehicle overturning. Subject to a deductible.
- Comprehensive Coverage
- Pays for non-collision losses including theft, fire, vandalism, hail, falling objects, and animal strikes. Subject to a deductible.
- Gap Coverage
- Pays the difference between a totaled vehicle's ACV and the outstanding loan or lease balance. Especially important for new vehicles.
- Total Loss
- When repair cost plus salvage value exceeds the vehicle's ACV, it is declared a total loss. Michigan insurers typically apply a 75-80% damage-to-value threshold.
- New Car Replacement
- If a new vehicle is totaled within the first one to two model years, pays for a brand-new replacement rather than the depreciated ACV.
Additional Coverages & Endorsements
- Uninsured Motorist (UM)
- Pays for the insured's injuries caused by a driver with no liability insurance. In Michigan, UM applies to bodily injury since PIP covers most medical expenses.
- Underinsured Motorist (UIM)
- Pays when the at-fault driver's liability limits are insufficient to cover all of the insured's damages.
- Rental Reimbursement
- Covers rental vehicle costs while the insured's car is being repaired after a covered loss. Typical limits are $30-$50 per day for up to 30 days.
- Towing & Labor
- Pays for emergency roadside assistance including towing, flat tire changes, lockout service, and fuel delivery.
- Rideshare Endorsement
- Fills the coverage gap when a driver is logged into a TNC app (Uber, Lyft) but has not yet accepted a ride.
- Named Driver Exclusion
- Excludes a specific household driver from all policy coverage.
Rating & Underwriting
- Named Insured
- The person or entity listed on the declarations page as the primary policyholder.
- Motor Vehicle Record (MVR)
- A driver's license history showing violations and accidents. Pulled by insurers during underwriting and at renewal.
- Credit-Based Insurance Score
- Michigan allows insurers to use credit information as a rating factor.
- Rating Territory
- The geographic area where the vehicle is principally garaged.
- SR-22
- A certificate of financial responsibility required by Michigan DLSOS for high-risk drivers.
- Policy Period
- The dates during which coverage is in force, typically six months or one year for personal auto policies.
Now that you know the terminology, put it to work. Our licensed Michigan agents will walk through every option with you — no jargon, no pressure. Learn about Michigan auto insurance or get a free comparison quote from 20+ carriers in minutes.