Why Is Car Insurance So Expensive in Michigan?
Last Updated on December 17, 2022
Michigan is one of the most expensive states in America for car insurance. In fact, Michigan has repeatedly been ranked as the number one most expensive state for car insurance.
Why is car insurance so expensive in Michigan? Why do Michigan drivers pay for more car insurance? Today, we’re explaining why Michigan drivers are paying higher rates – and what you can do to save money.
Michigan Has Always Ranked in the Top 3 Most Expensive States for Car Insurance
First, let’s clarify something. Michigan drivers have a reason to complain. It’s not in their imagination: Michigan is the most expensive state in America for car insurance.
Industry website Insure.com creates a list of the most expensive states for car insurance every year. Every year they’ve calculated the rankings, the company has ranked Michigan in the #1, #2, or #3 spot. Michigan has never fallen below #3 in Insure.com rankings. For 2020, Michigan is number one yet again.
In the last 8 Insure.com rankings, Michigan has captured the number one spot 5 out of 8 times.
In 2020, it wasn’t even close: the average Michigan driver paid approximately $2,878 for car insurance in 2020. Drivers in the next most expensive state, Louisiana, paid approximately $2,389 per year. Florida (#3), Texas (#4), and California (#5) round out the rest of the rankings.
Most states in the top 10 list have average annual car insurance premiums of $1,700 to $2,000. Michigan, meanwhile, isn’t even close: at $2,878 it’s hundreds of dollars more than the next most expensive state.
Drivers in Maine, meanwhile, paid just $912 for car insurance on average, which is why they were picked as the cheapest state for car insurance.
The national average for car insurance in the United States is just $1,517. That means Michigan drivers are paying over $1,300 more per year, on average, than drivers in other parts of the country. Michigan drivers are paying 85% more for car insurance than the average American driver.
Here are the top 20 most expensive states for auto insurance in 2020:
| Rank | State | Average Annual Rates |
|---|---|---|
| 1 | Michigan | $2,878 |
| 2 | Louisiana | $2,389 |
| 3 | Florida | $2,239 |
| 4 | Texas | $2,050 |
| 5 | California | $1,968 |
| 6 | Georgia | $1,936 |
| 7 | DC | $1,928 |
| 8 | Rhode Island | $1,918 |
| 9 | South Carolina | $1,759 |
| 10 | Delaware | $1,757 |
| 11 | Colorado | $1,741 |
| 12 | Montana | $1,693 |
| 13 | Connecticut | $1,688 |
| 14 | Wyoming | $1,684 |
| 15 | Kentucky | $1,621 |
| 16 | Arkansas | $1,620 |
| 17 | Mississippi | $1,580 |
| 18 | Nevada | $1,570 |
| 19 | New Jersey | $1,558 |
| 20 | Arizona | $1,557 |
We’ve established that Michigan has some of the most expensive car insurance rates in the country. But why do Michigan drivers pay more? Let’s take a closer look at some of the factors.
Top 5 Reasons Why Michigan is the Most Expensive State for Car Insurance
Michigan car insurance companies aren’t greedier than car insurance companies in other parts of the country. So what makes Michigan expensive? Here are some of the reasons:
1) No-Fault Car Insurance System
Many of the most expensive states in America for car insurance have a common theme: they all have no-fault car insurance policies. Michigan, like Florida and other states, has a no-fault system that allows drivers to recover financial losses from their own insurance company regardless of fault. It means your insurance company will pay for your medical expenses even when you’re not at-fault for the collision.
Interestingly, no-fault car insurance was originally introduced to lower insurance costs and reduce insurance fraud. Today, there’s been a huge push-back against no-fault car insurance policies because they’ve led to a rise in both insurance prices and insurance fraud. Nevertheless, Michigan continues to be one of 12 states with no-fault car insurance policies.
2) Personal Injury Protection Coverage is Required
Apart from Personal Liability and Property Damage (PLPD) coverage, Personal injury protection (PIP) insurance is also required for all drivers in Michigan. Car owners are required to buy PIP insurance that covers the medical expenses of the policyholder and household residents if they’re injured in an auto accident. This coverage also extends to passengers who don’t have their own PIP insurance.
PIP insurance is related to Michigan’s no-fault policies. Because Michigan is a no-fault state, drivers are required to cover their own medical bills regardless of fault, and that’s why drivers are required to have PIP.
3) Michigan’s PIP Insurance Requirements Are Different than Other States
Twelve other states in America have no-fault car insurance policies and PIP insurance requirements. Why is Michigan more expensive than all of these other states?
Well, other states place a limit on PIP coverage. Michigan’s PIP policy, however, does not: in Michigan, PIP policies guarantee unlimited lifetime medical benefits to those injured in an auto accident.
Your car insurance company can pay up to $555,000 to cover lifetime medical expenses. For medical expenses exceeding this amount, a nonprofit organization called the Michigan Catastrophic Claim Association (MCCA) picks up medical expenses exceeding that limit. Michigan drivers pay into the MCCA each year through their annual assessment fee, which is priced at $170 per vehicle.
4) High Rates of Insurance Fraud
Making things even more expensive for Michigan drivers is the high rate of insurance fraud across the state. Michigan has a relatively high rate of insurance fraud. One study indicated that approximately 10% of all no-fault claims in Michigan are fraudulent. Fraudulent claims raise money for insurance companies, and insurers pass these costs onto drivers.
5) High Rates of Uninsured Drivers
To make things worse, Michigan also has some of the highest rates of uninsured drivers in the United States. Approximately 1 in 5 Michigan drivers do not have any car insurance. This means the pool of normal, law-abiding drivers are paying higher insurance rates to cover the pool of those driving without insurance.
For a better idea of why auto insurance rates are so high in Michigan, listen to a Michigan lawyer explain the insurance situation in the state:
Conclusion: Compare Rates to Save Money on Michigan Car Insurance
Ultimately, Michigan drivers continue to pay the highest rates in the United States for car insurance – and things are unlikely to change anytime soon. Michigan’s no-fault system, stringent PIP requirements, high rates of insurance fraud, and high rates of uninsured drivers push Michigan’s average auto insurance rates higher than those of any other state in the country.
If you are a Michigan driver looking to save on your insurance rates, your best option is to compare as many car insurance quotes as possible. Check out our list of the top 25 auto insurance companies in the United States for ideas on who to get quotes from in Michigan. You can also view our list of smaller, local insurance companies to see if they offer competitive rates.
