Michigan Auto Insurance Requirements
by Doug Cohen

Information on Purchasing Auto Insurance in Michigan
Michigan does require drivers to buy and carry a no-fault auto insurance policy. And while you do not have a choice about buying auto insurance, you do have many choices when it comes to where you buy it, from which insurance company, and how much you will spend.

Twice a month insurance company rates increase and decrease. You may have recently experienced an increase in your premium or maybe you just want to check out rates. We can help by giving you the information you need to understand what affects your premium and giving you the tools to help you shop around for a lower premium or for a different insurance carrier.

What is the Mandatory Auto Insurance Law in Michigan?

Car owners in Michigan are required by law to buy and carry, at minimum, a no-fault auto insurance policy.  There are three parts to a no-fault policy in Michigan.

1. Personal Injury Protection (PIP) - Personal injury protection (PIP) pays your medical costs associated with the auto accident.
2.  Property Protection (PPI) - Property protection (PPI) pays up to $1 million for damage done to other people's property, such as buildings and fences for example, by your car.
3.  Residual Bodily Injury and Property Damage Liability Insurance (BI/PD) - Residual bodily injury and property damage liability (BI/PD) pays your defense costs and any damages you are found liable for as the result of an auto accident, up to the limits of the policy.  The minimum limits of coverage that everyone must purchase are 20/40/10.

What does 20/40/10 mean?

20 means $20,000 for a person who is hurt or killed in the auto accident.
40 means $40,000 max in each accident if more than one person is hurt or killed, and up to $10,000 per auto accident your car causes for property of others.  These minimum limits are often referred to as 20/40/10.  You can also buy higher limits of BI/PD liability coverage, which will also be explained more below.

What are some of the extra optional auto insurance coverages I can buy?
Some drivers choose to purchase additional coverage or purchase additional limits of the mandatory coverages.  These additional coverages and limits are optional and should be purchased based on your own circumstances.  The most common optional coverages are:

Physical Damage for Your Car (Collision and Comprehensive)
Your basic no-fault policy does not pay to repair or replace your car if it is damaged.  Therefore, if you want to have your car covered for damage, vandalism, or theft you must purchase collision and comprehensive coverage.  Collision coverage pays to repair or replace your car if damaged in an auto accident and is available with or without a deductible.  Comprehensive coverage pays if your car is stolen, collides with an animal or is accidentally damaged by falling objects, fire, flood, or vandalism.  You can generally purchase both of these coverages with or without varying levels of deductibles in an effort to reduce the cost of your insurance. A higher deductible will generally lower your car insurance premium.

There are The Three Types of Collision Coverage.
When deciding whether to purchase physical damage coverage on your car, you need to take into account what that coverage would cost in comparison with how much you could actually receive if the car is damaged. You may decide not to buy collision coverage, to buy a lower cost type of collision coverage, or to change the amount of your deductible.

Uninsured Motorists Insurance
Uninsured motorist coverage is an optional coverage that compensates you for pain and suffering and excess wage loss if you are injured in a hit-and-run accident or struck by an uninsured motorist.

Residual Liability Insurance - Increased Limits
Many people choose to purchase increased limits of residual liability insurance coverage. In the event of a serious accident, your liability may be more than the basic 20/40/10 liability coverage that you are required to purchase.  (see above for a full explanation of 20/40/10.) To protect themselves, many people buy extra liability coverage (e.g. 50/100/25, or $50,000 per person, $100,000 per accident in which people are hurt or killed and up to $25,000 for property damage).  Many other coverage combinations are also available.

Limited Property Damage Liability Insurance - Mini-Tort
Insurance companies also offer "mini-tort" coverage.  Under Michigan law, if you are 50% or more at fault in an accident, you can be sued for up to $500 in damages to another person's car that are not covered by collision insurance.  Many drivers buy this additional liability coverage to protect themselves from this specific liability.

Why should I insure my vehicle?

One reason you should buy car insurance is because most banks require their interests to be protected, meaning the loan you may carry on your car, in the event the car is damaged beyond repair or "totaled."

Also, did you know that Michigan has the most comprehensive no-fault auto insurance system in the nation?  That's right and if your vehicle is insured in Michigan, you and your family will be provided with unlimited medical and rehabilitation benefits, wage loss benefits and $20 per day for a replacement car for up to three years if you are injured in an car wreck, regardless of fault.  This security is probably the single most important reason to buy auto insurance alone.

And if those two reasons are not enough, remember that Michigan law requires no-fault insurance.  Every registered car must be insured.  If you own a car and you drive it, or allow someone else to drive it without basic no-fault insurance, you can be sued and held personally liable.  You may also be convicted of a misdemeanor and fined from $200 to $500, or put in jail for up to one year, or both.  The court may also order your license suspended for 30 days or until you are able to provide such proof.  In addition, if you are uninsured you may be held liable for all damages that result from the accident while uninsured, including your own.

How are rates developed?

Michigan's auto insurance is regulated by state law on a competitive basis.  This means that rates cannot be considered excessively high as long as there is competition among companies.  Currently over 65 insurance companies compete for Michigan customers with each other by offering a wide variety of rates and services.  Insurers are prohibited from communicating with other insurers about the rates they are setting.

There are two types of auto insurance policies:  group and non-group (or individual).

A group policy is one offered to a group or association's members.  Coverage provided by group and non-group policies generally are similar.  Remember, however, that different companies offer different coverage options in their policies.

Michigan State law sets forth the factors that companies use when setting their auto rates.  More rating factors are allowed for group policies than for non-group policies. Some of the factors that companies can use in setting rates include the type of vehicle you own, your driving record, your age or length of driving experience, where you live, and having multiple policies with the insurer (for example, both homeowners and automobile policies).

Companies pay out the premium money they collect when claims are filed.  In setting premiums, companies must estimate how much money they will pay for injuries related to accidents and for the repair or replacement of vehicles.  These costs increase annually and are one of the causes of insurance premium increases.  When a large number of claims gets filed, companies will pay more money than they expected to pay.  This increased frequency of claims is another reason that premiums may increase.

Insurers writing individual policies are required at least annually to provide you with a description of the rating classifications they use in setting rates.  This notification must occur with the notice of the renewal of the insurance.  The insurers also must provide you with a process to use if you believe the premium being charged is incorrect.  Under this process, any consumer believing that the premium is incorrect based upon the rating classifications can ask for a review of the rate by the company.  The Michigan Office of Financial and Insurance Services can review the rate if you believe it still is incorrect after the company review.

Does shopping for better rates really work?

You better believe it!  The over 65 auto insurance carriers that write auto insurance in Michigan are competing against the other companies to provide the cheapest possible car insurance rates, the broadest coverage, and the best possible service.  Competition works best, however, when drivers take the time to comparison shop car insurance for the rates and coverage that are best for them.  There are many reasons why shopping works.  Let's review some of the reasons:

First, companies offer a wide variety of rates in every area of the state.

Second, if you are eligible for coverage, under the law, every company must insure you.

Third, the economics of insurance are like the economics of any other product or service.  Companies offering more expensive coverage that lose customers due to the cost must either lower their rates or be satisfied with fewer customers.  Consumer choice often brings pressure on companies to lower their rates.

Fourth, shopping for car insurance is not as hard as it seems.  The next section gives you tips and the information that you need to become a knowledgeable shopper.  Shopping for insurance may not be exciting, but it very possibly will save you money.

Fifth, there are many companies offering insurance.  Sometimes the best rates and best service may come from a company you are unfamiliar with today.

Sixth, in almost every instance, every company must cover your auto, wherever it is.  There are a few instances where you may be deemed "ineligible" that will be described below.  However, for the most part whether you live in Ionia, Inkster, or Iron Mountain, every company writing auto insurance has a rate for you, and must provide coverage.

Where do I start shopping for my auto insurance?

You have come to the right place here to comparison shop auto coverage in Michigan. And don't forget to inquire about discounts (i.e. group discount, multi-policy discount, insurance credit score discount) that could reduce your insurance premium. You may be able to find a cheaper priced policy than you currently have, but cheaper is not always better.  Sometimes it is, but be sure you are truly comparing apples to apples.  Having said that, there is nothing wrong with shopping for which companies might provide you with the lowest possible rate.

I've found the companies with the best rates, how do I contact the company or an agent for the company?

This web site can help you in contacting companies and agents.  Each quote returned to you on-line will have phone numbers and email address you can use to contact a representative of the insurance company directly or to receive additional information about that particular company and their quote.

What information should I have available when shopping on-line?

Be prepared to provide any personal information (address, telephone number, social security number, income, etc) and information about your car and driving habits (vehicle identification number, whether you use your car to drive to and from work or just for pleasure use, safety and security devices such as air bags and anti-lock brakes, and whether you have had any tickets or accidents in the last several years).

You should also review your current auto policy's declaration page for your coverage, limits and deductible levels. The declaration page is the page of your policy that lists all of your current car insurance coverages, limits and deductibles, as well as the premium you pay for each of those coverages. The more info you provide, the more insurance companies will be able to provide you with a competitive quote.  This information from your declaration page  should be used to make sure the quote you are getting is for coverage similar to what you already have.

What should I be looking out for while shopping for auto insurance?

You are eligible for a wide variety of coverages.  Make sure you know what coverages are mandatory and be familiar with what coverages are purely optional and why you might need or want them.

Be certain to shop first for the required minimum coverages you need and then consider the difference in cost if you purchase a higher level of coverage than what is mandatory.

Michigan law also allows companies to provide discounts on the cost of coverage and most provide cross discounts if you insurance both your home and your car(s) with them.  Just as they often will have multicar discounts, so might they have multipolicy discounts.  Most people will be eligible for one or more discounts with an insurance company so you should always inquire about these and other group discounts that might be available.  Membership in some associations or groups might qualify you for a discounted group policy as well.

How might I lower my bill if I want to stay with my current insurance company?

There are many ways you might lower the cost of your auto insurance.  For example, consider the premium savings if you increase your deductibles.  Doing so will mean you pay more out of pocket should a loss occur, but it can lower the cost of your car insurance.

Also, be sure you are getting credit for your car's safety features.  For example, some companies reduce your insurance rates if your has air bags, anti-lock brakes or an alarm system.

If you have no tickets or accidents you are normally eligible for a good driver discount.

If you have more than one type of policy with the same company you are normally eligible for a multipolicy discount.

Some car insurance companies provide discounts if you have appropriate health insurance coverage and you coordinate your auto insurance with your health insurance.  (You may not coordinate if you have Medicaid, Medicare or a Medicare supplemental insurance policy.)

If you do coordinate, your health insurance policy becomes the primary payer for any injuries resulting from an auto accident.  Your auto insurance pays for reasonable expenses not covered by the health policy.  If you have health insurance, check with the company to make sure your health insurance coverage will pay for injuries related to a car accident before you try to coordinate coverage.  If you do not have health insurance, be sure to comparison shop that as well since rates are always changing.

And lastly, be sure to look into group discounts that might be available.  Membership in some associations or groups might lower your car insurance premium as well.

What does it mean to be ineligible for coverage?

Michigan law guarantees that auto insurance will be available to all eligible Michigan citizens.  The law says you are eligible if you have a car registered in Michigan or have a valid (not suspended or revoked) Michigan driver's license.  However, there are a few reasons why a company can refuse to insure you.  If an agent or company says that you are not eligible for coverage, they must give you the specific reason that you are not eligible for an auto policy with that company.

If you are not eligible for coverage directly in the voluntary market, you are still eligible for coverage through the Michigan Auto Insurance Placement Facility (MAIPF).  This entity is created by state law, but it is not a part of state government.  Although the MAIPF's rate may be higher than if you insured directly with an insurance company, any agent must submit an application to the MAIPF if you request him or her to do so.

Call Michigan's Office of Financial & Insurance Services toll free at 877-999-6442 if you are ever told any of the following (in a very limited number of circumstances these statements might not be illegal, but their office can verify this for you):

• We don't write insurance in that area
• We aren't taking any new insurance customers
• We don't have an insurance agent in your area
• We can't write your auto insurance policy unless you insure your home with us
• You aren't eligible for an insurance policy with our company (no explanation of ineligibility is provided) but we can place you with the MAIPF

What should I do if I have a problem shopping for auto insurance in Michigan?