Why Is Car Insurance So Expensive in Michigan?

The average cost of auto insurance in Michigan is $5,471 for a full coverage policy, making it the most expensive state for auto insurance by far.

The state’s extremely high insurance premiums are driven by many factors like the state’s insurance requirements, median healthcare costs, rates of uninsured drivers and more. Fortunately, you can take some steps as a Michigan resident to lower your insurance rates and find affordable policies.

Why are Michigan car insurance rates so high? The answer isn’t simple. Many factors contribute to why car insurance is so expensive in Michigan, including its no-fault status, additional insurance requirements, number of uninsured drivers, rate of insurance fraud, claims processing practices and personal injury lawsuits.

Because Michigan is a no-fault state, drivers must have personal injury protection (PIP) coverage, which covers financial losses regardless of who is at fault in an accident. This additional required coverage is one of the main reasons insurance premiums in the state are so high.

Michigan’s auto insurance requirements state that drivers must have PIP coverage, property protection insurance (PPI) and a minimum of 20/40/10 in liability coverage. PIP coverage helps pay for your medical bills and lost wages regardless of who is at fault, while property protection insurance pays up to $1 million for damage your vehicle causes to third-party properties.

Note that Michigan requires drivers to have unlimited PIP coverage, which guarantees unlimited lifetime medical benefits to those injured in an auto accident. While you may opt out of this if you have alternative medical coverage, it’s one of the main factors that increase the amount residents pay for insurance. On average, auto insurance providers in Michigan pay $555,000 for lifetime medical benefits for injured parties, increasing the cost of insurance for everyone.

Michigan has the second-highest number of uninsured drivers in the country, with almost 26% of drivers lacking auto insurance. That’s nearly 13% higher than the national average. When uninsured drivers get into an accident, the other party’s insurance provider covers property damage and medical expenses through uninsured motorist insurance. A high rate of uninsured drivers compels insurers to shift the cost to those with insurance to compensate for potential losses.

In Michigan, it’s estimated that 10% of no-fault insurance claims are fraudulent. Insurers pass on these losses to the policyholders, which is why premiums go up in states with high fraud rates. To avoid increased rates, drivers must protect themselves against fraud by educating themselves on fraudulent schemes.

Michigan’s insurance laws require auto insurance companies to reimburse claims within 30 days — otherwise, they’ll be penalized. This short grace period often doesn’t give insurers enough time to scrutinize claims properly, which increases the overall rate of fraud. Insurers in the state have to make up for these losses by charging policyholders higher premiums.

In Michigan, the number of personal injury lawsuits went up by 130% in the past ten years, with two-thirds of lawsuits involving drivers who sued their providers over no-fault insurance claims. The state’s no-fault system allows individuals to file for a personal injury lawsuit in case of serious injury.

Auto insurance rates naturally increase each year due to many factors, such as the consumer price index, the cost of repairing a car and the price of medical care. For instance, MoneyGeek found that Michigan's average car insurance premium in 2021 was 51.1% higher than in 2015. Drivers in 2021 pay an average of $477 more per year for auto insurance compared to what they did in 2015.