Information on Purchasing Home and Renters Insurance
Shopping is worthwhile!
Do you ever wonder about your home insurance?
Do you have enough coverage?
Are you paying too much for the coverage you have?
Has your premium increased recently?
Do you know what to do about it?
The Department of Insurance and Financial Services (DIFS) can help by giving you the information you need to understand what affects your premium and give you some tools to help you shop around for a lower premium. This document is separated into topic areas.
The topic areas are listed below and you can either click on a specific topic area to access that information or scroll through all of the topic areas. You may also want to review our publication, Your Guide to Homeowners Insurance For Michigan Consumers, which contains worksheets and more detailed information.
|Do I have to purchase homeowners insurance?|
|Michigan law does not require you to carry insurance on your home or personal property; however, if you finance your home, your lender will likely require you to purchase insurance on the buildings to protect their financial interest in the property. The loan documents will specify what coverage must be maintained and how proof of coverage is to be submitted to the lender or the company servicing the loan. If you do not provide proof of coverage, the lender will purchase an insurance policy and pay for it out of your escrow funds (this is called "force-placed" insurance). If your home is not being financed, you may choose not to purchase homeowners insurance. However, without insurance you are assuming all of the risk to replace your home and possessions if they are damaged.|
|How are rates developed?|
|Michigan's home insurance is regulated by state law on a competitive basis. This means rates cannot be considered excessively high as long as there is competition among companies. Insurance companies 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 homeowners policies: non-group (or individual) and group. A group policy is one offered to a group or association's members. Coverage provided by group and non-group policies are generally similar. However, whether group or individual, companies offer different coverage options in their policies.
State law sets forth the factors companies may use when setting their homeowners rates. More rating factors are allowed for group policies than for non-group policies. Rating factors must be specified in the company’s underwriting rules and applied uniformly and consistently to all of the company’s policyholders. The factors that companies can use in setting rates may include the type of house (wood or brick), the age of the home, physical condition of the home, security and safety devices (burglar alarms or smoke detectors), and distance from a fire hydrant.
Companies use premium payments to pay for covered claims. In setting premiums, companies must estimate how much money they will pay for the repair or replacement of homes. These costs increase annually and are one of the causes of insurance premium increases. When large numbers of claims are filed, typically following bad weather such as heavy winds, tornados, or heavy snow, companies may pay out more money than they anticipated. This increased frequency of claims is another reason premiums will increase.
Insurers writing non-group policies are required at least annually to provide consumers the opportunity to request a description of the rating classifications they use in setting rates. This notification must occur with the notice of the renewal from the insurance policy. The insurers also must provide consumers with a process to use if the consumer believes 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 Department of Insurance and Financial Services can review the rate if the consumer believes it still is incorrect after the company review.
|Does shopping around work?|
|Absolutely! Companies writing homeowners insurance in Michigan are competing against each other to provide the lowest possible rates, broadest coverage, and best possible service. Competition works best, however, when homeowners take the time to shop for the rates and coverage that are best for them.
Here are some reasons why shopping for insurance works:
|Where do I start shopping for my homeowners insurance?|
|This web site can help you in contacting companies and agents. Although some insurance companies do not use local agents, you can call the companies directly to ask for a quote. In nearly all circumstances, an insurance company cannot deny you coverage based on where you live or whether they have an agent in your area.
Use our Insurance Entity Search Page to search for any or all companies that are licensed to sell insurance in Michigan. Scroll down the insurance entity page screen and either request a list of all property and casualty insurance companies (this list will include companies that sell home insurance as well as other types of property and casualty insurance such as auto insurance) 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(ies) you requested.
You can also 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 city or zip code. The search result will provide you with contact information for the agent/agency and will provide you with the names of the insurance companies the agent/agency is allowed to place business with.
Your local Yellow Pages might also be a good place to start shopping for companies, agents, or agencies. Some companies, such as State Farm or AAA, 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. These agents also sometimes advertise the companies they represent.
|What information should I have available when I contact a company or an agent?|
|Be prepared to provide any personal information (address, telephone number, social security number) and information about your home (description, square footage, fire and security devices, distance from the nearest fire department and fire hydrant, etc.).
You should also refer to the declarations page of your current home insurance policy for your current coverage and limits. The declarations page is the page of your policy that lists all of your current coverages and limits as well as the current premium you are paying. This information will provide useful information to any agent, agency, or company providing you with a quote. It may make the process even easier if you provide a copy of your current declarations page to anyone providing you with a quote to make sure his or her quote is for coverage similar to what you already have.
If you are uncomfortable releasing this information, you should be able to answer questions about your current coverage over the telephone without providing a copy of your declarations page.
|What are the questions that I should ask while shopping for homeowners insurance?|
|First of all, be sure to get the type of policy that fits your situation. For example, there are different policies depending on whether you are a renter, a landlord, or live in your own home.
Then, there are two basic questions to ask any agent or company representative: what losses does your policy cover, and what losses are not covered by the policy? In addition to these questions, you should ask what additional coverages are available or what additional coverage they would recommend? Most companies provide a number of additional coverages, often called "riders" or "endorsements.” Examples of additional coverages include such things as antiques, collections, jewelry, furs, firearms, water damage, and backup of sewers and drains.
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. The more discounts you qualify for the more money you will save.
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.
Be certain to ask for the coverage that meets your specific needs. When you are deciding which type of policy suits your needs (such as Replacement vs. Repair Cost), consider what your house is worth, how much it would cost to replace it, and how much you can afford to spend for insurance. You can find out more by reviewing the “Homeowners Insurance: Replacement Cost vs. Repair Cost Policies” publication on our website.
|What information will the agent give to me while I'm shopping?|
|An agent will provide a premium quote from among the companies he or she represents. You may ask the agent for additional quotes from other companies, or contact another agent or agency representing different companies and ask for additional quotes. You can search for an agent or agency on our web site.|
|What other information should I know about a company?|
|Service on your policy is an important part of the contract of insurance 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, 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 you've filed for damage that occurred at your home. Our department can review concerns people have with their company. As we do so, we keep track of the number and types of complaints against a company. This information may help you decide whether to buy insurance from 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.
|How might I reduce my premium if I want to stay with my current insurance company?|
|There are a number of ways 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 a security system or working smoke detectors in your home, insure your cars with the same company, or pay your premium in full with one lump payment.
Also, you might ask about group discounts that might be available. Membership in some associations or groups might lower your premium.
|What does it mean to be ineligible for coverage?|
|You cannot be denied insurance solely because of the age of your house, its location, or the type of neighborhood you live in. However, there are a few reasons why a company can refuse to insure you. If an agent or company says your house is not eligible for coverage, they must give you the specific reason you are not eligible for a homeowners policy with that company.
You can learn more about ineligibility by reviewing our publication Homeowners Insurance: Are You Eligible?
If you are not eligible for coverage directly from a company, you are still eligible for coverage with the Michigan Basic Property Insurance Association (MBPIA), although the rates may be higher than if you insured directly with an insurance company. The MBPIA 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 Basic Property Insurance Association. Any agent must submit an application to the MBPIA if you request him or her to do so.
|What statements should I never hear from an insurance agent or an insurance company?|
|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):
|I am having trouble with an insurance company. Who can help?|
|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’s position, ask them to provide specific rules or language they believe excludes you from eligibility. If you are still dissatisfied, please contact our Office of Consumer Services toll free at 877-999-6442 to ask questions or to file a written complaint against the company, agent, or agency. You can click here to access the various complaint forms provided by DIFS.|