Why is Auto Insurance So Expensive in Michigan?

If you’re wondering whether the cost is relatively more expensive than other states in the USA, then you’re absolutely right. According to Governor Whitmer, drivers in Michigan pay 81% more on auto insurance than the national average.

This makes Michigan among the states that have the highest auto insurance rates in the country. Based on a study by MarketWatch, it was found that drivers in Michigan spend $1360 per year on minimum coverage insurance, and $3,643 a year on full coverage insurance.

But here’s the most concerning question, why is auto insurance so expensive in Michigan? And is there any way to lower it? This article explores the top 10 reasons why auto insurance is so expensive in Michigan and offers practical tips to reduce costs.

10 Reasons Why Auto Insurance is So Expensive in Michigan?

There are a bunch of reasons why auto insurance is so expensive in Michigan. Based on our research, and even according to a recent study by Bankrate, Michigan happens to be the 5th most expensive state for auto insurance. The average annual spending on auto insurance premiums is $3,356 which is 5.01% of income spent on auto insurance.

One of the main reasons Michigan has a relatively high auto insurance rate is, the rising auto repair cost, the state’s auto insurance law, high number of uninsured drivers, high number of accidents, traffic accidents and fatalities remaining alarmingly high, tons of lawsuits, and insurance fraud among others.

Inflation and Rising Auto Repair Cost

The thing about inflation is, it has an overall effect which leads to a rise in price in an economy which impacts the entire country and Michigan is no exception. According to the U.S. Bureau of Labor Statistics, motor vehicle repair prices have increased by 23% in 2023, which is four times higher than the overall price increase.

As of September 2024, the CPI (consumer price index) has increased by 2.4% with inflation rates in the last 3 years remaining on rising trend as follows:

• 4.7% average inflation rate in 2021
• 8.0% average inflation rate in 2022
• 4.1% average inflation rate in 2023

When the prices of food, oil, gas and other essentials products increase, it has also a directly proportional effect on manufacturing, and wage cost. As a result, the cost of vehicle parts and maintenance services also increases.

So, inevitably inflation and the rising auto repair cost has a tremendous impact on Michigan’s auto insurance rate. The higher it costs to repair and replace a vehicle after an accident, the more insurance companies need to cover and compensate. This leads to increased risks; therefore, it also leads to higher auto insurance premiums.

No-Fault Insurance System

Regardless of the hybrid auto insurance policies which combine both no-fault and at-fault insurance systems, Michigan is still officially a no-fault state. With a no-fault auto insurance system, drivers are legally required to cover damages regardless of whoever is at-fault for the accident.

For this reason, it is mandatory for every vehicle owner and driver to have an active PIP (personal injury protection) and property protection insurance policy. Ever since the year 2020, you have 4 options for the PIP insurance coverage which includes:

• $250,000 PIP coverage limit
• $500,000 PIP coverage limit
• $50,000 coverage limit with Medicaid
• Unlimited coverage limit

As of the legal reformations in 2020, it is no longer mandatory to acquire unlimited PIP coverage. Compared to the national average requirement of minimum $13,000 for PIP, or medical payments coverage, drivers in Michigan have to purchase at least $50,000 for PIP coverage with Medicaid. And, without Medicaid, it is mandatory to have a PIP coverage of $250,000 to $500,000 and above.

Learn more about:  New Auto Insurance Laws in Michigan

The fact that Michigan has a much higher requirement for a mandatory no-fault auto insurance system makes it a lot more expensive than many other states in the USA. As of September 2024, the average cost of PIP insurance with a $250,000 coverage limit is $844 per year, and about $70 per month. Depending on the coverage limit of your choice it can range from $428 to $2,176 per year on average.

Whereas the PIP cost is comparatively much lower in other states, such as:

• New Jersey: $336 to $2,043
• New York: $236 to $2,171
• Delaware: $232 to $2,117
• North Dokata: $97 to $1,555
• Pennsylvania: $78 to $1,777

Additional Insurance Requirements

Another factor that directly contributes to the high cost of auto insurance in Michigan is its additional insurance requirements. Despite being a no-fault insurance state, it’s not just the PIP insurance coverage that’s mandatory, you also must get the PLPD (personal liability and property insurance), and uninsured/underinsured motor vehicle insurance.

The PLPD insurance covers the medical bills, vehicle and property damage expenses of the other driver, the passengers of that vehicle, pedestrians and any other third parties affected and harmed by the accident in which you’re at-fault. In other states, PLPD insurance is commonly known as liability insurance.

Learn More: What is PLPDInsurance?

The minimum PLPD coverage limit is $50,000 for bodily injury, $100,000 per accident, and up to $1 million for property damage within Michigan, and $10,000 out of state. Whereas the national average for liability coverage includes $25,000 for bodily injuries, $50,000 per accident and $18,000 for property damage.

Similarly, the underinsured/uninsured motorist coverage in Michigan is $20,000 for bodily injuries, $40,000 per accident, and $10,000 for property damages. The fact that underinsured, and uninsured motorist coverage is mandatory in Michigan adds to its average auto insurance cost.

The average cost of PLPD insurance in Michigan is $1,880 per year or above, and the average annual cost of UIM/UM insurance ranges from $90 to $136.

Typically, you will need to acquire 3 mandatory auto insurance policies in Michigan with a relatively much higher minimum coverage limit. These additional insurance requirements make Michigan comparatively more expensive than other states.

Uninsured Drivers

About 20% of drivers in Michigan are uninsured. This makes Michigan the top 5 states with the most uninsured drivers in the USA. There are over 7.2 million drivers in Michigan, and this means that there are 1.44 million uninsured drivers.

Although according to the Departmentof Insurance and Financial Services, the number of uninsured drivers dropped by 6% between 2020 to 2022. Regardless of the decrease in the number of uninsured drivers, the total number of uninsured drivers is still very high in Michigan.

The high number of uninsured/underinsured drivers increases the risk for auto insurance companies as they have to cover a high coverage. If you get involved in an accident with an uninsured/underinsured driver who is at-fault for the accident and is unable to cover your financial damages, then your auto insurance company will have to compensate depending on your coverage limit.

On top of that, if you have purchased multiple auto insurance policies from the same insurer, for instance PLPD insurance, PIP insurance, UM/UIM insurance along with any other insurance policies, then your insurer will have to compensate a substantial amount from your coverage limits.

This put auto insurance companies under an increased risk, and that’s another reason why auto insurance is expensive in Michigan for having a high number of uninsured drivers.

Traffic Accidents and Fatalities Remain Alarmingly High

According to Michigan State Police, there were a total of 293,341 motor vehicle crashes in 2022, and 287,953 in 2023. Among these motor vehicle accidents there were more than 51,000 injuries with more than 1,100 fatalities.

Based on the police report, the number of deaths has slightly reduced by 4%, but as the death toll is more than 1,000, it is still a high number of fatalities. This shows that the traffic accidents, injuries, and fatalities remain alarmingly high in Michigan.

When it comes to determining auto insurance premiums, the main factor that’s considered is the chance of compensating for a motor vehicle accident. The fact that there are a substantially high number of traffic accidents in Michigan leading to a very high number of injuries and fatalities, the risk of compensating for these accidents is also very high.

So, with a high number of recurring traffic accidents, injuries, and death in Michigan, auto insurance companies need to cover more expenses, and that’s another crucial reason why auto insurance is so expensive in Michigan.

High Number of Deer-Vehicle Crashes

Another reason auto insurance rates are so high in Michigan is due to the high number of deer vehicle crashes. The crashes involve damaging the vehicle upon hitting or running into a deer at high speed or trying to veer the car to avoid hurting the deer, and ultimately crashing into vehicle, or trees. In more serious cases, you can also fall slide across the road, rumble down, or fall off and end in a severe crash.

According to the Michigan State Police, there have been reports of 58,000 deer-vehicle crashes occurring across Michigan in rural, suburban, and city areas. And 80% of the deer-vehicle accidents happened on two lane roads.

Also, according to a study published on Michigan Crash Facts, it was found that 42.5% of all deer-vehicle accidents occurred in winter from October to December which accounted for 22,210 crashes.

Based on both sources, the peak hours of deer-vehicle accidents usually range from 5am to 8pm, and 5pm to 10pm. As deer-vehicle traffic crashes are so frequent in Michigan, and in such a high number, it is another risk factor for auto insurance companies.

Ultimately auto insurance companies have to cover the cost of vehicle damage, and bodily injuries depending on the auto insurance policy and its coverage, so the chances of compensating for these accidents are very high in Michigan. So, this is another factor that contributes to the high auto insurance cost in Michigan.

Rising Healthcare Costs

Healthcare costs in Michigan are rapidly increasing, and that’s pushing towards higher auto insurance premiums. The massive surge of healthcare costs in recent years have spiked the average health-related insurance rates to increase by 3.2% to hitting double digits of 11.2% or more.

Auto insurance policies such as PIP insurance, PLPD, and UM/UIM insurance policies cover healthcare costs. So, with healthcare costs rising the auto insurance rates for these coverages are also increasing.

As there are many auto insurance companies in Michigan, the rates significantly vary from one auto insurance company to another. But the rising healthcare cost still has an overall impact on the auto insurance premiums. According to WalletHub, healthcare spending increases by 5.2% in Michigan every year.

Healthcare costs are already expensive in the USA, and with staggering increase in prescription drugs, surgeries, caregiver services, and other healthcare facilities, it’s natural for auto insurance rates to spike as well. So, the rising healthcare costs is another reason why auto insurance is so expensive in Michigan.

Frequent Personal Injury Lawsuits

Michigan already has a high track record of a high number of injuries exceeding 51,000 and fatalities over 1,100 each year. This makes it common for people to file lawsuits especially due to severe property damages, severe injuries, or the death of a loved one.

Mandatory auto insurance policies such as PLPD insurance, and UM/UIM insurance covers legal costs. Starting from the expenses of paying a lawyer to dealing with court proceedings and paying fines. Depending on the case and its severity, it can cost you hundreds, thousands, and even millions of dollars.

In Michigan, the number of personal injury lawsuits increased by 130% and 44% of plaintiffs receive financial compensation for personal injury lawsuits. So, this means auto insurance companies in Michigan consider a high risk of personal injury lawsuits which contributes to its expensive auto insurance rates.

High Rate of Auto Insurance Fraud

When there’s a substantial amount of auto insurance fraud, it can significantly increase the rate of auto insurance and make it more expensive to policyholders. This is mainly done by auto insurance companies to safeguard themselves and absorb the loss that may be incurred for covering a fraudulent auto insurance claim.

According to statistics provided by Michigan’s Departmentof Insurance and Financial Services, there were 21% bodily injury claims, and 18% personal injury protection (PIP) insurance claims that were closed with payments. This means that auto insurance companies in Michigan struggle with a significant number of auto insurance frauds.

So, the high rate of auto insurance fraud is a serious problem in Michigan which makes auto insurance so expensive in Michigan.

Severe Weather Conditions

Unfortunately, whether it’s the hot summer, or the icy cold winter, Michigan is prone to severe weather conditions like rain, tornadoes, earthquakes, floods, thunderstorms, and snowy winters.

Comprehensive insurance is a type of auto insurance policy that’s specifically designed to cover your vehicle for damage due to extreme weather conditions. But if you have crashed, and damaged your vehicle while driving, it can also be due to careless and reckless driving.

Even for those accidents insurance policies like PIP, PLPD, UM/UIM insurance among other policies should apply.  According to Michigan Traffic Crash Facts, 28,385 car accidents have occurred during rainy days. But the number significantly increases in winter mainly from October to December.

Between 2022 and 2023, there were a total of 30,786 car accidents in winter which includes 59 fatalities. It's harder to drive in winter as the roads are slippery, and also due to lower visibility it’s harder to see vehicles around. So, this makes it difficult to coordinate and navigate on the road.

As there are a high number of traffic crashes, injuries and fatalities due to weather conditions, this is another crucial factor that affects Michigan’s auto insurance premiums.

Tips to Lower Your Car Insurance in Michigan

Well, Michigan surely has the highest auto insurance rates in the country. But there are ways to lower auto insurance rates by following some basic tips. The average auto insurance rate is high, but with a clean driving record, and by applying some techniques you can lower your auto insurance rate, and even get discounts.

So, here are some tips that you can follow to lower your car insurance rate in Michigan.

• Take a Defensive Driving Course: In a defensive driving course, you will learn safe driving techniques, and you will also get a certificate which proves that you’re trained and fit for safe driving.
• Maintain a Clean Driving Record: A clean driving record shows you are less prone to getting into a car accident, which makes you less risky for insurers.
• Compare a Few Auto Insurance Companies: There are dozens of auto insurance companies in Michigan, so many auto insurance companies offer competitive rates. So, it’s a good idea to find the auto insurance company that provides the best deal in your budget.
• Explore Bundle Insurance Plans: Many auto insurance companies have bundle plan offers. So, by opting for bundle plans you can get cheaper auto insurance rates.
• Look for Discounts: Auto insurance companies often provide discounts, so it’s best to explore their website, or ask their insurance agent for discount offers.
• Go for Spousal Insurance Policy: If you’re married then you go for supplemental spouse auto insurance which comes with bundle offers and lucrative discounts for couples.
• Maintain an Annual Mileage of 7500 Miles or Lower: The lesser you drive, the lesser the chances of claiming auto insurance, that’s why auto insurance companies offer lower rates for car owners with a lower annual milage of 7500 or lower.
• Avoid Policy Lapse: Make sure to avoid policy lapses, being uninsured for a while can increase your auto insurance premium as this acts as a signal that you can cancel your auto insurance policy in the near future.
• Choose a Usage Based Auto Insurance Policy: If you drive for a limited milage per year, then you can go for a used based auto insurance policy, also known as telematics, auto insurance. This will help you get auto insurance premiums based on how much you drive annually.
• Increase Your Deductibles: This is the least safe option, as it lowers your coverage so that’s why make sure to lower it tactfully so that it doesn’t lead to substantial financial risks in the event of an accident.

Bottomline

Undoubtedly Michigan is among the most expensive states for auto insurance but at the same time it has a dozen options for affordable auto insurance coverage. So far, this article has covered the 10 major reasons why auto insurance is expensive, and the data shown here is basically the average auto insurance premium.

Typically, auto insurance premiums vary based on individual driving profile. Here a lot of factors are considered which includes your age, gender, driving record, license, legal history, insurance records, marital status, and more.

So, if you’re looking for a reliable auto insurance agency in Michigan that offers affordable auto insurance policies, please contact us for a free quotation.

FAQ

Why does Michigan have the most expensive car insurance?

Michigan’s car insurance is among the most expensive in the USA mainly because of the rising auto repair cost, the state’s auto insurance law, high number of uninsured drivers, high number of accidents, traffic accidents and fatalities remaining alarmingly high, tons of lawsuits, and a high rate of insurance fraud.

Is car insurance in Michigan high?

Yes, car insurance in Michigan is among the most expensive in the country as the average annual auto insurance spending is $3,356 which is 5.01% of income spent on auto insurance.

How to reduce car insurance in Michigan?

The best way to reduce car insurance in Michigan is to take a defensive driving course, maintain a clean driving record, find auto insurance companies with lower rates, explore bundle insurance plans, looking for discounts, exploring spousal insurance policies, maintaining an annual mileage of 7500 miles, avoiding policy lapse, opting for usage-based auto insurance and increasing insurance deductibles.