Information on Purchasing Home and Renters 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.

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. Some of 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, 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 may 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. DIFS can review the rate if the consumer believes it is still incorrect after the company review.

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:

• There are many companies offering a wide variety of rates in every area of the state. Sometimes the best rates and best service may come from a company you are not familiar with today. Taking some time to review Your Guide to Homeowners Insurance will provide you with the information you need to be an informed consumer.
   
• If you are eligible for coverage under the law, and almost every person in Michigan is, every company must insure you.
   
• The economics of insurance are like the economics of any other product or service. Companies offering more expensive coverage will lose customers due to the cost. These companies must either lower their rates or be satisfied with fewer customers. Consumer choice can bring pressure on companies to lower their rates.
   
• Shopping for insurance is not as hard as it seems. The next section gives you tips and the information you need to become a knowledgeable shopper. Shopping for insurance may not be exciting, but it will probably save you money.
   
• Every company must cover your home, wherever it is. Whether you live in Ionia, Inkster, or Iron Mountain, every company writing homeowners 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; 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.

You may be considered ineligible for homeowners insurance under Michigan law if:

• Within the past 5 years you have been found guilty of arson or of an attempt to commit arson, the use of explosives, or destroying property.
• Within the past 5 years you have been denied payment by an insurer of a claim under a homeowners insurance policy based on evidence of arson, fraud, or conspiracy to commit arson or fraud.
• The property you want to insure is used for illegal or dangerous purposes.
• Taxes on the property you want to insure are 2 or more years past due.
• You refuse to buy the minimum amount of coverage required for the type of policy you want.
• Your home has a physical condition which presents an extreme likelihood of a significant loss under a homeowners insurance policy.
• Within the past 2 years your home insurance has been canceled because of non-payment of premium, unless you pay the entire premium in full before the issuance or renewal of the policy.
• A company requires you to be a member of a group, club, or organization and you choose not to join or maintain membership.
• The value of the property you want to insure does not meet the minimum requirements for the type of policy you want to buy.

If you find that you are ineligible for homeowners or renters insurance, you may ask your agent to apply to the Michigan Basic Property Insurance Association (MBPIA). The MBPIA was created by the state legislature to provide homeowners insurance to persons who cannot find insurance in the regular market. Any licensed agent can help you obtain insurance through the MBPIA.

For more information, please review the following consumer publications:

Homeowners Insurance: Are You Eligible?

The Michigan Basic Property Insurance Association

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 homeowners insurance. Some insurance companies do not use local agents; therefore, you can call the insurance company directly to obtain a quote. A homeowners insurance company cannot deny you coverage based on where you live or whether they have an agent in your area.

DIFS’ Insurance Licensee Locator can assist in your 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 or by email at DIFScomplaints@michigan.gov.

Be prepared to provide information about you and your home, including, but not limited to:

• Address of the property
• Telephone number
• Description of your home, including square footage
• Whether you own or rent your home
• Whether you have made any recent home improvements
• How the home is heated – natural gas or propane

You should also refer to the declarations page of your current homeowners insurance policy for your current coverage and limits. The declarations page is the page of your policy that lists your current coverages and limits as well as the current premium you are paying. This information will be useful 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 the quote for coverage is similar to what you already have.

If you are uncomfortable releasing your declarations page, you should be able to answer questions about your current coverage without providing a copy of your declarations page.

There are a number of ways that you might reduce the cost of your homeowners 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 homeowners insurance companies. For example, some companies reduce your premium if you have certain safety features such as a home security system or working smoke detectors. 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).

Finally, ask about group discounts the company offers. Membership in some associations or groups might lower your premium.

For more information and a complete explanation of all the discounts you may be eligible for, consult with your licensed agent or insurance company.

If you are concerned your homeowners insurance company is not performing as required under the law or if you hear the following statements while shopping for homeowners 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 home insurance unless you insure your auto 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 Michigan Basic Property Insurance Association (MBPIA).

DIFS encourages you to first attempt to resolve your complaint directly with your licensed agent or 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.

Online Complaint Form

 Once you file a complaint, DIFS will respond to your complaint by doing the following:

• Contacting the insurance company, insurance agency and/or licensed insurance agent to obtain a written response.
• Confirming the 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. 

If you suspect fraud by an individual or a business in the 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.

Consumers & Industry

Industry Log In Via NAIC