But if it costs a lot, people would rather just take the risk and then be on the hook for way more money than they can pay. Which is why paying for insurance is legally mandated in some cases.

The problem is we have that - and even the cost of obliterating however many pedestrians and cyclists divided over all drivers is mere pennies.

How does liability insurance cover the risk of an uninsured under-insured driver hitting me?

(I live in Michigan and continue to carry unlimited PIP FWIW)

I do not buy any PIP because I have health insurance with an out of pocket maximum.

Although, I think states should require quite a bit of PIP as well so that non drivers are not subsidizing drivers.

Michigan's unlimited PIP is lifetime (so no out of pocket maximum to cover in year 2 of your catastrophe). There's rules about what is covered of course, but the financial side of it is a bit simpler.

My premium for the year is less than 1 month of health insurance, it's pretty cheap.

Except they operate in a competitive and fairly transparent market, so it’s actually not like that at all. Insurance rates are very tuned for a variety of risk profiles to capture the specific risk segments the insurer wants to take on and they compete for price in that space. If you don’t like what it costs from A you might be able to find it cheaper with B, and B has incentive to do that.