Information on Purchasing Auto Insurance
The information below applies to auto insurance policies issued on or before July 1, 2020. For auto insurance policies issued or renewed after July 1, 2020, please visit www.Michigan.gov/AutoInsurance for updated information.
- Why should I purchase auto insurance?
To drive legally in Michigan, state law requires the purchase of no-fault automobile insurance. If you or your family are injured in an auto accident, your auto insurance will pay all reasonably necessary expenses with no maximum limit, as well as wage loss benefits and replacement service benefits. In a serious accident, injuries can amount to hundreds of thousands of dollars in cost to you. The financial security that results from being insured is one of the most important reasons to purchase insurance.
Driving without insurance is a crime. It is punishable as a misdemeanor with a fine of up to $500 and up to one year in jail. The court may also order your license suspended for 30 days or until you are able to provide proof of valid insurance.
- What happens if I don't insure my motor vehicle?
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 for all injuries and damages that result from an accident, including your own. You may also be convicted of a misdemeanor and fined $200 to $500, 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 proof of valid insurance.
- What auto insurance coverage do I have to purchase?
There are three basic parts to a no-fault policy that must be purchased and carried on every vehicle:
Personal Injury Protection (PIP) - PIP pays all reasonable and necessary medical expenses for your lifetime if you are hurt in an auto accident, and wage loss and replacement services for up to three years after the date of the accident.
Property Protection (PPI) - PPI pays up to $1 million for damage your vehicle does in Michigan to other people's property, such as buildings, fences, and other people’s properly parked vehicles.
Residual Bodily Injury and Property Damage Liability (BI/PD) - BI/PD pays, up to the limits of the policy, your defense costs and any damages you are found liable for as the result of an auto accident in which someone was killed or seriously injured. The minimum limits of coverage that everyone must purchase are:
- $20,000 per person who is hurt or killed in an accident
- $40,000 for each accident if several people are hurt or killed
- Up to $10,000 for damage your vehicle does to property damage in another state.
These minimum limits are often referred to as 20/40/10.
You can purchase higher limits of BI/PD coverage, which will be explained in the next section.
You may also consider reviewing the following publications:
- What are some of the optional auto insurance coverages I can buy?
There are several types of coverage that you can choose to buy in addition to the required no-fault insurance. Some of the most common types of optional insurance are described below:
Collision and Comprehensive Insurance
Your no-fault insurance DOES NOT pay for repairs to your car if it is damaged in an accident. If your car is properly parked and hit by another car, the other driver’s no-fault coverage will pay for the damage to your car. Except for this one situation, the only kinds of auto insurance that will pay for repairs to your car are collision and comprehensive coverage.
- Collision coverage pays for repairs to your car when it is damaged in a crash. There are three basic kinds of collision insurance to choose from: limited, standard and broad form. The Three Types of Collision Coverage
- Comprehensive insurance pays for your car if it is stolen or for repairs if it is hit by a falling object, collides with an animal, or is damaged in a fire, flood or by vandals.
If you have an older car, you may not want collision and comprehensive coverage. If your car is financed, the company that loans you the money may require that you buy collision and comprehensive coverage.
Limited Property Damage Liability Insurance - “Mini-Tort”
Under “mini-tort,” if you are 50% or more at fault in an accident, and damages to the other driver’s car are not completely covered by his or her insurance, you may be sued and may have to pay up to $1,000 in damages. This also means that you may sue the other driver for damages to your car which are not covered by your insurance if the other driver is 50% or more at fault. Insurance companies usually offer this coverage as an optional coverage which you may purchase for an extra cost. Mini-Tort: An Exception to "No-Fault"
Towing and Rental Car Coverage
Towing and Rental Car Coverage is available from most insurance companies and generally covers or reimburses the cost of towing and/or a rental car for covered events (accident, breakdown, flat tire, etc.). The cost is usually small in relation to the total policy premium. Alternatively, many insurance agencies offer memberships into clubs that offer these types of benefits to their members.
Uninsured and Underinsured Motorists Coverage
These coverages will pay if an uninsured or underinsured motorist seriously injures you or a member of your household and you are awarded a settlement from the at-fault driver.
- How are rates developed?
Insurance companies use underwriting and rating rules to help decide if they will insure you and how much they will charge. Underwriting is a process in which an insurance company determines if the risk you present meets the standards or guidelines it has established for you to obtain or retain auto insurance with the company. These rules may be different for each company, but each company must apply its rules in the same way to everyone.
Underwriting rules and rates for auto insurance policies must be filed with and approved by the Department of Insurance and Financial Services (DIFS) before they can be used.
- Does shopping for better rates work?
Yes. Insurance companies do not all use the same factors to group individuals for rating purposes, so the cost of insurance can vary considerably. It is important for consumers to shop around and compare if they are unhappy with the cost or service associated with their insurance company. Michigan law guarantees that auto insurance will be available to all eligible Michigan residents. 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 you are not eligible for coverage, they must give you the specific reason you are not eligible for an auto policy with that company.
For more information, please review the following consumer publications:
- What if I am ineligible for automobile insurance?
If you are ineligible to purchase auto insurance, you may want to ask your agent to apply to the Michigan Automobile Insurance Placement Facility (MAIPF) for you. The MAIPF was created to offer insurance to individuals who have difficulty finding insurance coverage. Alternatively, you may also seek insurance from a company that specializes in writing policies for high risk drivers.
For more information, please review the following consumer publications:
- How might I reduce my premium if I want to stay with my current insurance company?
There are a number of ways that you might reduce the cost of your auto insurance. You can ask about premium savings if you increase your deductibles. Doing so will mean you pay more out of your pocket should a loss occur, but it will reduce the premium you pay.
There are many other discounts offered by auto insurance companies. For example, some companies reduce your premium if you have certain safety features such as air bags, anti-lock brakes, or anti-theft devices. You may also qualify for a discount if you are a good student, or if you have more than one type of policy with the same company (such as your auto insurance policy and a homeowner or renters insurance policy).
If you have health insurance, ask about coordinating your health insurance policy with your auto policy to receive a discount. You should confirm with your health insurance company that they will pay primary if you are injured in an auto accident. When your policy is coordinated, your automobile insurance will pay secondary for all reasonable expenses not covered by your health insurance coverage. You may not coordinate if you have Medicaid, Medicare, or a Medicare supplement policy.
Finally, ask about group discounts the company offers. Membership in some associations or groups might lower your premium.
For more information, please review the following publications:
- Where do I start shopping for auto insurance?
The Department of Insurance and Financial Services’ (DIFS) website can help you find a licensed insurance company and insurance agent to assist you in purchasing auto insurance. Some insurance companies do not use local agents; therefore, you can call the insurance company directly to obtain a quote. An insurance company cannot deny you coverage based on where you live or whether they have an agent in your area.
Use DIFS’ Insurance Licensee Locator to search for insurance companies, agents, and agencies licensed to sell homeowners insurance in Michigan.
Remember to only work with licensed insurance companies, agents, and agencies. If you have concerns about the individual or entity you are working with, contact DIFS toll-free at 877-999-6442.
- What information should I have available and what questions should I ask my insurance company/agent while shopping for insurance?
Be prepared to provide information about you and your vehicle, including, but not limited to:
- Home address, including the garaging address of your vehicle, if they differ
- Telephone number
- Driver license number
- Names of other people living in the household
- Vehicle identification number (VIN)
- Whether you use your vehicle to drive to and from work or just for pleasure
- Safety and security devices such as air bags and anti-lock brakes
- Driving history
You should also refer to the declarations page of your current auto insurance policy for your current coverage and limits. The declarations page is the page of your policy that lists your current coverages, limits, and deductibles, as well as the current premium you are paying. If you are uncomfortable releasing this information, you should be able to answer questions about your current coverage without providing a copy of your declarations page.
Be certain to ask for the coverage that meets your specific needs. When you are deciding on what coverages to purchase (such as collision or comprehensive), consider what your vehicle is worth, how much it would cost to replace it, and how much you can afford to spend for insurance.
- Who can help if I am having a problem shopping for insurance?
If you are concerned your auto insurance company is not performing as required under the law or if you hear the following statements while shopping for auto insurance, the Department of Insurance and Financial Services (DIFS) is here to help:
- We do not write in that area
- We are not taking any new customers
- We do not have an agent in your area
- We cannot write your auto insurance unless you insure your home with us
- You are not eligible for a policy with our company (no explanation of ineligibility is provided), but we can place you with the MAIPF.
DIFS encourages you to first attempt to resolve your complaint directly with your licensed agent or auto insurance company. If a resolution cannot be reached, you may file a complaint with DIFS by clicking on the link below. Your complaint will be reviewed based on the documents you submit, so please be sure to include all pertinent information.
Once you file a complaint, DIFS will respond to your complaint by doing the following:
- Contacting the auto insurance company, insurance agency and/or licensed insurance agent to obtain a written response.
- Confirming the auto insurance company and other licensees named in your complaint are performing as required under your policy and the law.
- Helping you understand options that may be available to you.
You will receive a copy of all correspondence received during DIFS’ review of your complaint, as well as a letter explaining our findings.
- How can I report auto insurance fraud?
If you suspect fraud by an individual or a business in the auto insurance industry you can report it to DIFS safely, easily and anonymously (if you wish) by clicking on the “Consumers and Industry” button below or by calling DIFS at 877-999-6442. Insurance industry members can also report insurance fraud by using the National Insurance Commissioners Association’s (NAIC) online fraud reporting system (OFRS) by clicking the “Industry Log In Via NAIC” link below.
The answers provided are not meant to be a substitute for legal advice.