Why Is Car Insurance So Expensive In Michigan?

Michigan is one of the 12 states in the U.S. that follows a no-fault insurance system, and for many years, it has had the highest car insurance rates in the country.

As someone with over 20 years in the insurance industry, I’ve seen firsthand how Michigan’s mandatory personal injury protection and high medical costs impact premiums. Keep reading to learn exactly why your car insurance costs so much and what you can do about it.

Unique Reasons Why Car Insurance In Michigan Is So High

The cost of Michigan car insurance can be attributed to the following factors:

High Minimum Insurance Requirements

Drivers in Michigan pay an average of $7,161 a year for full-coverage insurance, which is 270% higher than the national average and nearly double the cost in the next most expensive state. This is largely due to Michigan’s high minimum liability coverage requirements. Most drivers must carry at least $250,000 in Personal Injury Protection (PIP) coverage, which adds to the overall cost of insurance.

Uninsured Drivers

Michigan has made significant progress in reducing its uninsured motorist rate, with a decrease of over 6% from 2020 to 2022. However, as of November 2024, nearly 20% of drivers in Michigan are uninsured, which is higher than the national average of around 12%. A higher number of uninsured drivers means more risk for insured drivers, as accidents with uninsured motorists can lead to costly claims. This increased risk contributes to higher insurance premiums for everyone in the state.

Severe Weather

Climate change has played a major role in rising car insurance costs, with a 7% increase in 2024 alone. Severe storms, tornadoes, and other extreme weather events have already started to cause more damage, leading to higher claims and, ultimately, higher premiums.

Michigan’s No-Fault Car Insurance System

The goal of Michigan’s No-Fault system was to reduce lawsuits by ensuring that everyone’s own insurance covered their costs. While this has helped reduce legal claims, it hasn’t been enough to offset the high cost of medical care. The state’s unlimited PIP benefits require insurance companies to pay out large sums for medical expenses, which drives up premiums for everyone.

Michigan’s Catastrophic Claims Association (MCAA) Fee

The MCCA fee is another reason car insurance is so expensive in Michigan. It’s purposely designed to cover medical costs for the most severe accidents or injuries once they exceed $635,000. This means that insured drivers pay a mandatory annual fee as part of the state’s no-fault insurance system. This is currently $90 per vehicle for unlimited PIP coverage.

While Michigan’s no-fault system ensures all drivers use their own insurance for medical costs, the MCCA covers catastrophic claims, making it a separate but connected fee.

Increasing Repair Costs

Inflation has had a big impact on the price of car insurance, especially due to the rising costs of auto parts. With parts becoming more expensive, repairs cost more, and insurance companies must pay out more on claims. This increase in repair costs contributes to higher premiums for drivers across the state.

Insurance Fraud

Fraud is a significant issue in Michigan’s auto insurance industry. It often occurs during the insurance purchasing process or when filing benefit claims. When consumers commit fraud, it puts extra pressure on insurance companies, as they must cover the false claims, leading to higher costs for everyone. To make up for these fraudulent payouts, insurance companies raise premiums across the board.

Factors Causing Your Car Insurance To Be So High

Several factors can impact the cost of your car insurance. Below are some of the most common ones that can affect your premium.

Coverage Level

In Michigan, the level of coverage you choose for your car insurance directly affects your premium rates. Due to Michigan’s high mandatory Personal Injury Protection (PIP) requirements, even minimum coverage costs can be significantly higher than in other states.

While higher coverage provides better financial protection in the event of an accident, it also means you’re paying for that added security. For example, if you choose full coverage with lower deductibles or add extra coverage like comprehensive or collision insurance, your rates will go up. The more coverage you have, the more risk the insurance company is taking on, which is reflected in the higher premiums you’ll pay.

Age

Insurers assess your risk level based on age-related driving patterns. Younger drivers, especially teens, statistically cause more accidents and are therefore charged higher premiums. Conversely, drivers in their 50s often see lower rates due to safer driving records.

Location

Your location strongly influences insurance costs. While Michigan law prevents insurers from basing rates solely on ZIP codes, your local area’s accident rates, theft occurrences, and weather patterns can significantly affect your premium.

Driving History

Insurers examine past driving records to determine risk. Accidents, traffic violations, and speeding tickets can substantially increase premiums, reflecting your perceived likelihood of filing claims in the future.

Safety Rating Of Your Vehicle

Insurance companies often consider your vehicle’s safety rating when setting rates in Michigan. A higher safety rating suggests a lower risk of injury during a crash, which means the insurer is less likely to pay out on a claim, potentially lowering your premium.

Claims History

Filing multiple past insurance claims identifies you as a higher-risk driver, causing insurers to charge higher premiums due to anticipated future payouts.

Understanding these factors helps Michigan drivers make informed decisions to manage and potentially lower their car insurance costs.