Michigan No-Fault Insurance: What Policy Limits Really Mean for You
Why Policy Limits Matter More Than You Think
Most Michigan drivers know they need car insurance, but very few actually take the time to understand how much protection they’re getting. When you hear the phrase “policy limits” from your insurance company, it may sound like just another technical detail. But in reality, your policy limits determine how much financial protection you’ll have if you cause an accident.
In 2019, Michigan lawmakers made major changes to the state’s auto insurance laws. These changes increased the minimum liability coverage for drivers — but they also gave people the option to lower their coverage. That choice can leave drivers dangerously underinsured without even realizing it.
Let’s walk through what policy limits are, how Michigan law changed, and why carrying enough liability coverage is one of the smartest financial decisions you can make.
What Are Policy Limits in Auto Insurance?
When you buy an auto insurance policy, you’re essentially entering into a contract: you pay premiums, and in return, the insurance company agrees to cover you up to a certain dollar amount if you’re found responsible for an accident.
That dollar amount is your policy limit. Once your insurance company has paid out that amount, you’re on the hook for anything above it.
For example:
If you cause a crash that results in $400,000 of injuries but your liability limit is $250,000, your insurance will only pay $250,000.
The remaining $150,000 could come directly out of your own pocket — through wage garnishment, liens, or even seizure of assets.
This is why having the right policy limits is critical for protecting not just your car, but your financial future.
Michigan’s 2019 No-Fault Reform: What Changed?
In 2019, the Michigan legislature amended the No-Fault Act. One of the most important changes required every Michigan driver to carry at least $250,000 in liability coverage.
Here’s what that means for you:
If you’re at fault in an accident, your insurance company will pay up to $250,000 for injuries caused to others.
This amount is higher than the old requirement, which many experts considered far too low to handle today’s medical costs.
Drivers are allowed to opt down below $250,000 by signing a special waiver form.
On paper, opting down can lower your monthly premiums. In reality, it can expose you to enormous financial risk.
The Real-World Cost of Being Underinsured
Catastrophic injuries often result from car accidents. We’re talking about spinal cord injuries, traumatic brain injuries, and long-term disabilities that require years of care. The medical costs for these injuries can easily reach into the hundreds of thousands — sometimes even millions.
Here are two scenarios to consider:
Scenario 1: Adequate Coverage
A driver with $250,000 in coverage causes an accident that results in $200,000 in medical bills. The insurance company pays all of it, and the driver isn’t personally responsible.Scenario 2: Insufficient Coverage
A driver who opted down to $50,000 causes the same accident. Their insurance pays $50,000, but the other $150,000? That driver could be sued personally and may lose wages, savings, or even their home.
In other words, saving a little money on premiums today could cost you everything tomorrow.
Why Many Michigan Drivers Lower Their Coverage
So why would anyone take that risk? A few common reasons include:
Cost concerns: Lower coverage = lower premiums.
False confidence: Many people believe “it won’t happen to me.”
Confusing paperwork: Some drivers sign opt-down forms without fully understanding the consequences.
Insurance companies aren’t always great about explaining the risks, either. Their focus is often on closing the sale, not educating you about your long-term protection.
How to Protect Yourself and Your Family
The good news is that you can take simple steps to make sure you’re adequately covered:
Keep your coverage at $250,000 or higher. It’s the minimum for a reason — and in reality, even more coverage is often wise.
Consider an umbrella policy. Umbrella insurance can provide additional liability coverage beyond your auto policy, often at a relatively low cost.
Review your policy regularly. Don’t assume your insurance agent has your best interests in mind. Review your limits once a year, especially if your financial situation changes.
Talk to a professional. A knowledgeable attorney can review your coverage and help you understand whether you’re truly protected.
Frequently Asked Questions
Is $250,000 really enough liability coverage in Michigan?
Not always. While $250,000 is the legal minimum, serious accidents often cost far more. Many experts recommend carrying $500,000 or even $1 million in coverage if possible.
Can I be sued personally if damages exceed my policy limits?
Yes. Once your insurance company has paid out your full policy limit, you are personally responsible for any remaining damages.
Why would my insurance company let me lower my coverage if it’s risky?
Because it makes their policies more affordable and attractive to price-conscious customers. Unfortunately, they don’t always emphasize the financial dangers of lowering your limits.
Don’t Gamble With Your Financial Future
Car accidents happen every day — and when they do, the costs can be devastating. Michigan’s $250,000 liability coverage requirement was designed to give drivers a stronger safety net, but many people unknowingly put themselves at risk by opting for lower limits.
At Measel Law, we believe knowledge is power. By understanding your policy limits, you can make informed choices that protect you, your family, and your financial future.
