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Information on Purchasing Auto InsuranceNo-fault automobile insurance is mandatory in Michigan. Although you don't have a choice about buying auto insurance, you do have some choices about how much you pay and who you choose as your insurance company. You may have recently experienced an increase in your premium or maybe you just want to check out some other companies but you don't know where to start. The Office of Financial and Insurance Regulation (OFIR) can help you by giving you the information you need to understand what affects your premium and giving you some tools to help you shop around for a lower premium or for a different insurance company.
This document is separated into topic areas. The topic areas are listed below and you can either click on a specific topic area to assess that information or scroll through all of the topic areas.
Michigan has the most comprehensive no-fault auto insurance system in the nation. 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 replacement services for up to three years if you are injured in an auto accident, regardless of fault. This security is one of the most important reasons to purchase insurance.
In addition to the security that insurance provides to you and your family, Michigan law requires no-fault insurance. Every registered vehicle 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 an accident while uninsured, including your own.
There are three basic parts to a no-fault policy that must be purchased and carried on every vehicle. They are:
Personal Injury Protection (PIP) - Personal injury protection (PIP) pays all necessary medical costs if you are hurt in an auto accident.
Property Protection (PPI) - Property protection (PPI) pays up to $1 million for damage your car does in Michigan to other people's property, such as buildings and fences.
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 $20,000 for a person who is hurt or killed in an accident, $40,000 for each accident if several people are hurt or killed, and up to $10,000 for property damage in another state. These minimum limits are often referred to as 20/40/10. You can also purchase additional limits of BI/PD coverage, which will be explained in the next section.
You can learn more about each of these mandatory no-fault coverages in our publication Brief Explanation of Michigan No-Fault Insurance. You can also obtain additional information by reviewing A Consumers Guide to No-Fault Automobile Insurance in Michigan and our Buyers' Guide to Auto Insurance in Michigan* .
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. You can also learn more about these optional coverages in the publications listed in the previous section. 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 vehicle covered if it is damaged or stolen you must purchase collision and comprehensive coverage. Collision coverage pays to repair or replace your vehicle if it is damaged in an accident and is available with our 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 purchase both of these coverages with deductibles in an effort to reduce the cost of your insurance.
There are several different collision coverage options that your agent can explain to you. You can also learn more by reading our consumer publication 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 if an uninsured motorist strikes you.
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. To protect themselves, many people buy extra liability coverage (e.g. $50,000 for each person, $100,000 for each 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 consumers purchase this additional liability coverage to protect themselves from this specific liability.
You can learn more about each of these optional coverages in our publication Brief Explanation of Michigan No-Fault Insurance. You can also obtain additional information by reviewing A Consumers Guide to No-Fault Automobile Insurance in Michigan and our Buyers' Guide to Auto Insurance in Michigan*.
Michigan's auto insurance is regulated by state law on a competitive basis. This means that rates cannot be considered excessively high so long as there is competition among companies. Currently, approximately 65 insurance companies are listed in our buyers' guide that compete with one another for customers by offering a 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 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.
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 large numbers of claims are filed, companies will pay more money than they expected to pay. This increased frequency of claims is another reason that premiums will 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 Office of Financial and Insurance Regulation can review the rate if you believe it still is incorrect after the company review.
Absolutely! The approximately 65 companies listed in our buyers' guide that write auto insurance in Michigan are competing against the other companies to provide the lowest possible rates, broadest coverage, and best possible service. Competition works best, however, when drivers take the time to shop 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 are offering a wide variety of rates in every area of the state.
Second, if you are eligible for coverage under 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 can bring pressure on companies to lower their rates.
Fourth, shopping for 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 not familiar with today. Taking the time to review the Buyers' Guide to Auto Insurance in Michigan and the listing of agents and companies will allow you to find and contact the companies.
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 later. 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. You may contact any company or agent selling insurance in Michigan and ask for a quote, even if you have to call an 800 number or make a long-distance telephone call. You don't have to live in the area in which the agent is located to get a policy from a company he or she represents.
The Buyers' Guide to Auto Insurance in Michigan* gives examples of base rates charged by insurance companies writing auto coverage in Michigan. It's important to note that the rates and the companies included in the guide may change if new companies enter the state or update their rates. Also, the rates do not take some common discounts into consideration (i.e. group discount, multi-policy discount, insurance credit score discount) that could reduce your insurance premium. Therefore, you may be able to find a lower priced policy than the rates shown in the guide once you are credited with any and all discounts allowable based on your personal circumstances.
There are four example households used in the guide for which rates are displayed. The survey will not provide you with an exact rate for you. But it will demonstrate the wide range of rates that are available for the same coverage. The survey also will give you some idea of the comparative prices charged by the various companies doing business in Michigan.
Find the household example and the rating territory in the guide that most closely resembles your personal situation. Then, compare the wide range of rates that are available from the companies listed in the guide. By doing this, you will gain a better idea of which companies might provide you with the lowest possible rate. Again, you may be able to find a lower rate than what is listed in the guide once you have been credited with any and all discounts you are eligible for.
Use our Insurance Entity Search Page to search for a list of all companies that sell property and casualty insurance (this list will include companies that sell home insurance as well as other types of property and casualty insurance such as auto insurance) or to search for a specific company. Scroll down the insurance entity page screen and either request a list of all property and casualty insurance companies or request information for a specific company. Once you have made your selection, click the "Submit" button at the bottom of the screen and you will receive information about the company/companies that you requested.
You also can find insurance agents or agencies in your area by searching information we have on our web site. You can search for a particular agent or agency by name or you can search for all agents or agencies in your area by zip code. The search results will provide you with contact information for the agent/agency and will provide you with the names of the insurance companies that the agent/agency is eligible to place business with.
Your local yellow pages might also be a good place to start shopping for companies that you have heard about. Some companies, such as State Farm, have agents who represent only that company. Looking in the Yellow Pages under Insurance will tell you if there's a local agent for these companies. Other insurance agents are considered "independent" insurance agents, meaning they represent more than one company. These agents will advertise in the Yellow Pages and may also advertise the companies that they represent.
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 vehicle 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 declaration page of your current auto insurance policy for your coverage and limits. The declaration page is the page of your policy that lists all of your current coverages, limits and deductibles, as well as the premium you are paying for each of those coverages. The information will be useful to any agent/agency/company that is providing you with a quote. It may make the process even easier if you use this information to complete our "Shopping for Auto Insurance Worksheets" (see page 17-21 of the Buyers' Guide to Auto Insurance in Michigan*). This information from your declaration page or even a copy of your declaration page should be provided to anyone offering you a quote to make sure it is for coverage that is similar to what you already have.
You are eligible for a wide variety of coverages. Make sure you know what coverages are mandatory and be familiar with any of the optional coverages you might need or want. You can learn more about each of the mandatory no-fault coverages as well as some of the common optional coverages in our publication Brief Explanation of Michigan No-Fault Insurance. You can also obtain additional information in A Consumers Guide to No-Fault Automobile Insurance in Michigan and our Buyers' Guide to Auto Insurance in Michigan*. Be certain to ask for the coverages that meet your specific needs and ask your agent about 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. Most people will be eligible for one or more discounts with a company. Although agents and company representatives generally will tell you the discounts for which you are eligible, be certain to ask about them. They can save you money. Click here and go to page 6-9 of the Buyers' Guide to Auto Insurance in Michigan* for a listing of possible discounts.
You should also ask about group discounts that might be available. Membership in some associations or groups might qualify you for a discounted group policy.
An agent is required to give you the lowest available premium quote from among the companies she or he represents. You may want to contact another agent or agency and ask for additional quotes, since an agent can only quote premiums for the companies that they represent. You can search for an agent or for an agency on our web site.
Service on your policy is an important part of the contract of insurance that you are purchasing. Service includes such things as properly crediting your account with your premiums, and the manner in which claims for losses that you might file are handled.
It is not likely, but possible, that a dispute may arise between you and your insurance company over some aspect of the policy. Typically, this occurs as you negotiate the settlement of a claim that you've filed. This office can help people who are having difficulties with their company. As we do so, we keep track of the number of times that we receive a concern or complaint about a company. This information will give you a better idea about whether current policyholders file complaints against the company, and if they do what types of things they complain about which may help you decide whether to insure with a particular company. Click here to display complaint ratio information. And remember, this information is just one factor for you to consider in whether to insure with a company.
There are a number of ways that you might reduce the cost of your insurance. For example, you might ask about premium savings if you increase your deductibles. Doing so will mean that you pay more out of your pocket should a loss occur, but it will reduce the premium you pay.
You also could ask about steps you could take to receive a discount on your premium from the company. For example, some companies reduce your premium if you have certain safety features such as air bags, anti-lock brakes or an alarm system on your vehicle, if you have no tickets or accidents, or if you have more than one type of policy with the same company.
Discounts are also available 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 policy. Ask your agent about the option to coordinate coverage. If you 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.
Also, you might ask about group discounts that might be available. Membership in some associations or groups might lower your premium.
You can review another consumer publication How to Reduce the Cost of Your Car Insurance for tips on reducing the cost of your insurance. The Buyers' Guide to Auto Insurance in Michigan and our Consumers Guide to No-Fault Automobile Insurance in Michigan also contains additional suggestions.
Michigan law guarantees that auto insurance will be available to all eligible Michigan citizens. The law says that 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. You can find out more by reviewing the publication The Michigan Auto Insurance Placement Facility 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.
Finally, if you have questions, please call us toll free at 1-877-999-6442 so that we can help by answering your questions.
Michigan law makes it illegal for an insurance company or an insurance agent to do certain things. We want to know if you are told any of the following statements as you talk with an agent or a representative of a company. Call us immediately toll free at 877-999-6442 if you're ever told any of the following (in a very limited number of circumstances these statements might not be illegal, but our office can verify this for you):
We want to know if you have a problem with an agent/agency or insurance company during the process of shopping around for coverage. If you disagree with an insurance company about whether you are eligible for coverage, try to resolve the issue with the insurance company. If you still do not agree with the company position, ask them to provide specific rules or language that they believe excludes you from eligibility. If you are still dissatisfied, please contact our Consumer Services Division toll free at 877-999-6442 to ask questions or to file a written complaint against the company or agent/agency.
Our goal is to provide you with the information that makes the process of shopping for insurance as easy as possible. We want to know if our web site and our staff are providing you with the tools to make this process work for you. So please take a few minutes of your time and let us know how we're doing and what we can do to do a better job for you by completing our online survey ! We also invite you to return to our survey once you've finished shopping and let us know if our site was helpful to you.
The answers provided are not meant to be a substitute for legal advice.
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