Why Is Car Insurance in Michigan So Expensive?

To put into context just how expensive Michigan car insurance premiums are, here’s a quick overview of how average rates for different categories compare to the national average.

Michigan is one of twelve states that use a no-fault insurance system. Under this system, all drivers must carry personal injury protection, which pays for their medical expenses in the event of an accident, regardless of who was at fault. By contrast, in at-fault states, the driver who caused the accident pays for the other party’s medical expenses.

No-fault laws tend to increase average premiums statewide, since insurers take on added risk by having to cover drivers even if they don’t cause an accident. Michigan’s required PIP coverage is also quite high at $250,000 for most drivers. For reference, New York, the no-fault state with the next-highest minimum PIP, requires $50,000 in coverage.

Michigan used to require unlimited PIP, which was a major factor in its even higher rates in the past, but this changed as a key part of the state’s auto reform legislation.

In 2019, under Governor Gretchen Whitmer, Michigan passed auto insurance reforms to tackle the problem of high rates, which went into effect in July 2020.

As mentioned above, one of the biggest changes involved PIP requirements, which used to be unlimited for all drivers — something not found in any other U.S. state. The legislation updated this requirement but still gives drivers the option to choose unlimited PIP if they’re willing to pay a higher premium. Most drivers can also choose PIP coverage limits of $500,000 or $250,000.

In certain cases, insurers can offer lower PIP coverage. Drivers enrolled in Medicaid are eligible to choose $50,000 of coverage, while seniors enrolled in both Medicare Part A and Part B have the option to opt out of it entirely. Insurers were also mandated to lower average PIP premiums by a certain amount (depending on the level of PIP coverage) for eight years.¹ This provision will expire in July 2028 unless further legislation is passed.

In addition to PIP adjustments, the new law banned auto insurance companies from using certain non-driving factors as rating factors when determining rates. These include credit history, gender, ZIP code, and marital status. The reforms also implemented a fee schedule to limit how much medical providers could bill insurers under PIP coverage to help combat inflated billing amounts.

While efforts are underway to bring car insurance rates down in Michigan, they remain high. The following are some of the other contributing factors in addition to the no-fault system.

High minimum coverage requirements

Michigan’s minimum coverage requirements are some of the highest in the country, and the more coverage insurers have to provide, the higher their rates. In addition to its high PIP requirements, Michigan also mandates the following minimum coverage limits:

• Bodily injury liability: $50,000 per person/$100,000 per accident
• Property damage liability: $10,000 per accident outside Michigan, $1 million per accident within Michigan

Michigan is one of only a handful of states with this level of minimum bodily injury liability coverage, and it has the highest property damage liability requirements, by far. And while unlimited PIP is no longer required, most drivers still opt for it, so premiums have not lowered as much as expected.²

High rate of uninsured drivers

Michigan doesn’t require uninsured motorist coverage, but it has one of the highest rates of uninsured drivers in the country, ranking fourth after Mississippi, New Mexico, and Washington, D.C.³ In Michigan, an estimated 22 percent of all drivers are uninsured, compared to the national average of 15 percent.

Uninsured drivers increase rates statewide because if they cause an accident, they leave the other party to cover their damages via coverages like uninsured motorist and collision, and this poses an increased risk for insurers.

Increased severe weather

Like in many states throughout the U.S., severe weather events have become more common in Michigan in recent years.⁴ More severe weather means a higher likelihood of vehicles and property damage, which translates to higher insurance rates.

Expensive rates in Detroit

Detroit and the surrounding metro area consistently rank among the most expensive cities for car insurance in the country, which contributes to Michigan’s high average statewide rate.

Insurers point to its dense population and historically high crime rate (particularly motor vehicle theft) as reasons for the high rates. The population of Detroit is also younger, on average, than Michigan as a whole, and younger drivers pay more for car insurance.

While the 2020 insurance reform legislation technically prohibits insurers from using ZIP codes to determine rates, the law does allow for the use of “territories,” as long as they are not based on ZIP codes. This means that where you live can still impact how much you pay.

Michigan drivers should expect to pay more than the national average for car insurance, but there are some ways they can reduce their premiums:

• Bundle policies: Purchasing your auto insurance from the same company you use for renters, homeowners, or another policy type can make you eligible for a multi-policy or bundling discount, which most providers offer. Bundling is often one of the easiest ways to save hundreds on your annual premium.
• Avoid violations: Tickets, at-fault accidents, and DUIs can significantly raise your rates for several years, particularly in a state like Michigan, where many other rating factors cannot be used, thereby potentially giving more weight to your driving record. Maintaining a clean driving record is one of the most effective long-term ways to keep premiums down.
• Opt for lower PIP coverage: Michigan now allows drivers to choose lower PIP limits, which can reduce a portion of their premiums. Just make sure you understand what protection you’re giving up before selecting a lower cap.
• Ask about discounts: Most insurers offer a wide range of discounts, including for completing defensive driving courses, being a good student, and opting for paperless billing. Many aren’t applied automatically, so it pays to ask.
• Consider pay-per-mile insurance: If you drive less than average, it’s worth looking into insurers that offer a pay-per-mile or usage-based program. These types of policies can lower your costs by tying part of your premium to how much you actually drive. These programs aren’t available everywhere, but they can be a great option for low-mileage drivers.

Michigan’s high car insurance rates are largely a result of its unique no-fault system, which, from 1973 to 2020, required unlimited lifetime medical benefits (also known as personal injury protection, or PIP) and drove up premiums statewide. While 2020 reforms provided more choice in PIP coverage and reduced certain fees, rates remain elevated — particularly in urban areas like Detroit.

This is partly because many drivers continue to choose unlimited PIP, as well as due to factors such as uninsured drivers and high minimum liability requirements. It’s worth noting that while no-fault systems and high coverage requirements cost more upfront, they also offer better financial protection and a generally more seamless claims process for drivers. Michigan is still working to balance strong medical protections with affordable coverage for drivers.