Car insurance is so expensive in Michigan because the state requires the most expensive minimum coverage levels in the country. Michigan’s no-fault car insurance regulations require drivers to cover their own losses, no matter who causes an accident. Michigan drivers are also required to have a Personal Injury Protection (PIP) policy to pay medical expenses for themselves and any passengers who don’t have their own insurance. While this is not unusual in a no-fault state, Michigan is the only state to set no dollar limit on this coverage. In other words, if a covered driver or passenger sustains a serious injury, like brain damage or loss of limbs, they are guaranteed unlimited lifetime medical benefits. In some cases, these benefits can cost millions of dollars.
Car insurance companies are required to pay up to $555,000 to cover lifetime medical expenses. Costs over this amount are covered by the non-profit Michigan Catastrophic Claim Association (MCCA). Michigan drivers contribute to the MCCA by paying an annual assessment fee through their insurance. That fee is $220 per vehicle in 2019. This is in addition to the high cost of PIP coverage, which continues to rise with increasing medical costs.
A high rate of insurance fraud, fueled by Michigan’s generous benefits, has led to even higher premiums. Studies show that 8% - 10% of all claims in Michigan are fraudulent. In addition, the high cost of insurance in Michigan has made coverage unaffordable for many drivers. Roughly 1 in 5 drivers in the state is uninsured, according to the Insurance Information Institute. Fewer insured drivers to pay premiums drives up the expense for those who are paying.
Expensive benefits and high rates of fraud and uninsured motorists have made Michigan one of the costliest states for car insurance.
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