Auto Insurance in Michigan - What you should know

Since I didn’t have to sign a waiver before or after working for them, I feel as though what I am about to share is just fine. There are a few things regarding Auto Insurance in the State of Michigan that most people should know, but are not informed of. Having worked for an Insurance company for a short time I feel that I should share what I learned.

Michigan is what is called a “No Fault” State. What that means is if you should get into an accident it is your insurance that pays for the damage done to your car regardless of who is at fault. In our State it is required that you maintain insurance on your vehicle. What that means is you need to keep coverage and not let it lapse at any time. This will be covered later as to ‘why’.  Some Insurance Agents will not tell you why, I will.

We have several different kinds of insurance with different levels of coverage.  For the best explanation I will use 2 terms “Full Coverage” and “PL/PD”.   Full coverage means that should you get into an accident your vehicle will be repaired.  PL/PD means that you have insurance and your vehicle will not be repaired, but you are covering the other vehicle. 

This came into inception to help prevent frivolous lawsuits.  Such as someone rear-ending you and you claiming neck injury, suing that person’s insurance for tons of money.  There are still lawsuits, but these are usually against the person (which your insurance will back you up on, provided you have enough coverage). 

Michigan has a ‘State Minimum’ of insurance, even for full coverage it’s called 20/40,  Which is where I come in.  The company I worked for specialized in selling the lower coverage policies to people who truly don’t know any better.  In Michigan you have to have ‘proof’ of insurance to get your vehicle ‘legal’, meaning in order to get your license plates you had to be able to show to the Secretary of State you have insurance. 

I had been a customer for this company for 8 years and didn’t know any better, it was never explained to me by my Insurance agent. When I started my training many things were explained. Very shortly there after I switched companies, even while I was still working.

When you are trying to find insurance you call around to get your best price, correct? Our company of course gave you the best price, because they were an inferior company. We were ’underwriters’ who wrote for several companies, meaning that you could have your choice of companies in which would carry your insurance. To do this we would gather together your information ie; drivers license number, social security number, birth date, the type of vehicle you were trying to insure, even your address. Yes, where you live in Michigan also play a part in your cost. Once this information in entered into the computer to several different companies, the various prices would pop up. We would tell you those prices, and 99.9% of the time the cheapest was chosen. Personally, I never had anyone choose a higher priced insurance, nor was the coverage even questioned.

Our company was great for the ‘first timers’, those that had never had insurance before. We could get them on the road quickly with minimal cost. What I began to tell my customers is this: NEVER LET YOUR POLICY LAPSE, no matter what, even if you have to eat jujubees for a week, keep that policy in place! Why? Because every time you let it lapse you are put back into the ‘high risk’ pool. Those that are getting insurance for the first time have to pay a higher cost, it’s just the rule. Every time you buy food instead of insurance, you will go back into the high risk category. Which means your insurance will not go down.

Having had 5 kids and letting my policy lapse from time to time, and getting older, I never knew why my insurance was so high. It never seemed to go down. I’d let it go for a week then re-sign up. By the time I was in my late 30’s my insurance should have went down considerably, yet I was paying a high premium.  I even told her "I could go into a parking lot and smash into every car there and my policy couldn't go higher".  My agent just laughed at my comments. Why? Because she got paid a bonus for every new policy she wrote. Every other month she would get a ‘bonus’ from me, and I stayed in the 'High Risk' pool. No wonder she never told me.

Once you have kept your insurance for 5 full months you can begin look for other agencies, what we shall call ‘more reputable’ companies. At the 6th month mark, you can change. You MUST keep your policy for 6 full months and be able to prove it to get out of the 'High Risk' pool. Just give them a call, they will give you a quote over the phone. It may not seem any better in price, but you will have higher coverage. Should there come a time when you own your own home, you will want more coverage. The lawsuits are still in place, you can be sued. Your insurance will only cover as much as you have in place. The 20/40, means you are covered $20,000 (personal damage) and $40,000 (property damage). If you’ve ever spent any time in the hospital you will discover that this amount of money won’t go very far!

Some Insurance companies are now using credit histories to determine your costs, so keeping a good credit score is important in keeping your costs down.  They will run a credit check on you!

To cut your costs for full coverage you can request that your deductible be raised. Which means if you need to make repairs to your vehicle it will cost you some out of pocket money, but will lower your monthly costs. There are other ways to save as well. If you have the money you can pay 6 months in advance, that will cut your cost considerably. For those that have a monthly payment and a bank account, you can have the money withdrawn automatically each month. This will cut your initial ’down payment’ cost.

There are other things you should know before purchasing that vehicle to insure. If your going for PL/PD insurance (Personal Liability/ Property Damage) which covers the other vehicle, not yours. The type of vehicle you are having insured, the cost will be effected. It used to be the color that made it a higher cost (red was the highest cost), now it’s also the type. For instance you are looking at a Neon and a pick-up truck. The truck is going to cost you more, why? It can do more damage in an accident than the Neon can. Insurance companies always assume you will get into an accident, and that it will be your fault, regardless of your driving record.

If you are a young person, your insurance will automatically be higher.  You have less experience on the road, therefore the Insurance companies feel you will get into an accident.  It's just the way that it is.  But you can get out of that 'High Risk' pool by keeping your policy in effect.

If you should get into an accident and it isn’t your fault, determined by an Officer of the law, you can have the other persons insurance pay your deductible. If you have PL/PD, their insurance will pay you what is called a ‘Mini-Torte’, but you must ask for it. You can only receive this if it was determined to be the other persons fault. You may also have to send pictures as well as the police report. They will not just send you a check, you will have to prove the accident happened. That is the policy of the Insurance companies.

A program is being implemented in the State that will tell police officers via the computer if you have insurance or not. Some counties have it, some don’t. Most State Police officers have this in their vehicle. Regardless of whether they ask you or not, you still must carry your proof of insurance in your vehicle at all times. Even if you have insurance but not your proof, they can and will write you a ticket for not having proof of insurance. This is a HUGE fine, one that you truly don’t want to pay. 

Michigan has implemented a a program called 'Driver Responsibility'. Essentially it is fees, that should you be found guilty of an infraction you will be assessed fees for 2 years or more. Not having your proof insurance will get you a $200 fee for the 1st year, it will go down to $100 the second year. So not only will you have the court fine, but an additional fee to the State. If you do not pay this your license will be revoked.

Always keep in mind Driving is a privilege not a Right.

More than anything, let me reiterate NEVER LET YOUR POLICY LAPSE! It will cost you in the long run.