A Teen’s Guide to Car Insurance in Michigan: What You Really Need to Know

Getting your driver's license is a big deal freedom, fun, and the open road! But before you hop in the car, there is one major task you must understand: auto insurance. It is not the most exciting part of driving, but it is one of the most important.

What Is Auto Insurance?

Auto insurance is a contract you buy from an insurance company that helps pay for medical bills and car repairs if you’re in an accident. It will also help pay for other potential damage to your car including theft, fire, or collision with an animal.

Why Do I Need Auto Insurance?

In Michigan, it is illegal to drive without insurance. If you are caught driving without car insurance, you could be fined, lose your license, or even go to jail.

You need auto insurance, which:

• Covers injuries to you and your family.
• Pays for damage your car does to other people’s property.
• Protects you if you are found legally responsible for an accident.

What is the Minimum Coverage I Need?

Michigan law requires three parts:

1. Personal Injury Protection (PIP) Medical Coverage: PIP medical coverage pays for allowable expenses for medical care, recovery, and rehabilitation if you have injuries from an auto accident. You pick the level of PIP medical coverage for your policy.
• Option 1: Unlimited Option 2: $500,000
• Option 3: $250,000
• Options 4–6: Lower coverage options if you have Medicaid, Medicare, or other qualifying health plans
2. Property Protection Insurance (PPI): Pays up to $1 million for damage your car causes to property in Michigan, like buildings or fences.
• Residual Bodily Injury and Property Damage Liability (BI/PD) Insurance: Liability coverage provides protection to you in the event you are found legally responsible for damages caused as the result of an accident. Default limits: $250,000/person, $500,000/accident, $10,000 for damage in another state.
• Minimum coverage is $50,000/$100,000 for the liability options, make sure when you are selecting that you are comfortable with the limits you have chosen.

What is Optional Coverage?

You may consider adding additional coverage to your car insurance policy to protect your vehicle. These optional coverages cost more money but will provide protection against physical damage to your car.  

• Collision: Covers damages from a crash with another vehicle.
• Comprehensive: Covers theft or repairs if your vehicle is damaged by a falling object, fire, vandalism, flood, or collision with an animal.
• Mini-tort: Provides up to $3,000 for physical damage you cause to another person’s vehicle not covered by insurance.
• Roadside assistance: Provides coverage for towing and other services.
• Rental: Provides coverage for a rental car if you cannot use your car after an accident or other covered event.
• Uninsured/underinsured driver coverage: Provides compensation to you in the event you are involved in a covered accident with another driver that either does not have insurance or does not carry sufficient insurance.

What is a Premium?

An insurance premium is the amount of money that you pay to an insurance company to purchase and maintain an insurance policy.

Most auto insurance contracts are for six-month periods, but annual or monthly policies may also be available. For the insurance contract to remain in force, you must make your premium payment on time.

What is a Deductible?

The insurance deductible is the amount of money you must pay out of pocket before the insurance company begins to pay for a claim. For example, if your deductible is $500, and repairs to your car cost $2,000, you will pay the first $500 out of pocket, and the insurance company will pay the remaining $1,500.

How Can I Save Money?

Auto insurance premiums vary among insurance companies, so be sure to shop around. Your premium will depend on the coverages you choose, and factors related to your personal situation, such as driving record and claims history.

Here are some tips to keep in mind:

• Be added to a parent’s or guardian’s policy as a secondary driver, which will be cheaper than having your own policy.
• Pick a safe car. That sporty-looking vehicle may be appealing; but, if it is a type of vehicle that is frequently stolen, or has high repair costs due to its body construction, it will cost more to insure.
• Get a quote before buying a car. Always consider the cost of car insurance before purchasing a car. Contact your insurance agent and ask for a quote on the cost of coverage because some cars will be much less expensive than others.
• Compare quotes from several different companies with a licensed insurance agent.

Do Not Forget Discounts!

Ask your insurance company or agent about:

• Good student discounts
• Multi-car discounts
• Low mileage drivers
• Safety equipment (airbags, anti-theft)
• Bundling (auto + home insurance = savings)

Michigan law says companies can’t base your car insurance rate on: gender, marital status, home ownership, credit score, occupation, educational level, or zip code.

Still Have Questions?

Call the Michigan Department of Insurance and Financial Services (DIFS) at 833-ASK-DIFS or email us at AutoInsurance@michigan.gov.  We can help you understand your options and rights.

Bottom line? Driving is a privilege that comes with real responsibilities. Understanding car insurance now will save you money, stress, and issues down the road.

About DIFS

The mission of the Michigan Department of Insurance and Financial Services is to ensure access to safe and secure insurance and financial services fundamental for the opportunity, security, and success of Michigan residents, while fostering economic growth and sustainability in both industries. In addition, the Department provides consumer protection, outreach, and financial literacy and education services to Michigan residents. For more information, visit Michigan.gov/DIFS or follow the Department on Facebook, X, or LinkedIn.