Why Michigan’s Car Insurance Rates are So High

It can be a little hard to believe, but Michigan residents pay the second highest car insurance rates in the nation. The average Michigan inhabitant pays $2,500 a year for car insurance; that’s $1,000 more than the national average for auto insurance premiums, which is $1,500.

Michigan's State Capital in Lansing source of high auto insurance premiums.

Michigan’s State Capital in Lansing source of high auto insurance premiums.

So what’s to blame for Michigan’s high car insurance rates? The state government in Lansing, that’s what. Michigan’s high car insurance costs are purely the result of some very unusual state laws.

How State Laws Drive Up Michigan’s Car Insurance Premiums

Three provisions in state law send Michigan drivers’ premiums through the roof. Fortunately, these mechanisms are not found in any other state. These provisions are:

  • Something called personal lifetime injury protection. Basically, motorists and their insurance companies have to compensate accident victims for the rest of their lives in Michigan. Currently insurers reimburse a victim for up to $500,000 under this law. It means that any accident in Michigan can lead to $500,000 in medical claims. Among other things, accident victims in Michigan get lifetime care under this law. 


  • The Michigan Catastrophic Claims Association. Despite its name, that’s really a fund that covers accidents medical expenses if they exceed $500,000. Every car insurance policyholder in the state has to pay a $175 fee to support this fund.

  • No-fault auto insurance. That means that every driver involved in an accident is legally at fault. Your insurance company cannot sue a driver that caused an accident. That means everybody shares equally in the costs, and the irresponsible don’t pay higher rates.

car insurance rates

The high car insurance premiums drive up auto insurance rates in another way. When premiums are high, there are more uninsured drivers on the road. When more people drive without coverage, insurers have to make up the difference by raising the rates for the responsible.

Fortunately for Michigan drivers, some politicians are trying to help drivers. Gov. Rick Snyder is backing a plan that would cap injury payments at $1 million. The plan would also require healthcare providers to charge the same rates for procedures, which is also supposed to lower rates.

That’s the good news. The bad news is that Snyder’s plan would only lower the average car insurance premium by around $250 a year. The average resident of the state would still pay $2,250 a year for car insurance, or about $850 over the national average.

With car insurance rates like that and politicians unwilling to do anything about them, it’s easy to see why Michigan has been losing population for years. What’s worse is that politicians don’t seem to want to do anything about it.


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