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(No) Fault of Its Own: MI Leads Nation in Auto Insurance Costs

By: Kristi Kenyon August 24, 2017
Because of its no-fault insurance and unlimited medical coverage for injured motorists and passengers, Michigan's auto insurance is the highest in the U.S.

Even though the national average for car insurance rates is down from last year, some states’ rates are almost three times as much as others. An annual study released by Insure.com last month lists Michigan as the big “winner” for 2017, with an average annual insurance premium of $2,394.

The results make it Michigan’s fourth consecutive year as the most expensive state for car insurance. It outpaces the national average for a full-coverage plan, which is $1,318—down 1% from last year.

In comparison, drivers in Maine—which boasts the nation’s lowest car insurance rates—pay an average annual premium of just $864.

There are many factors that go into how car insurance premiums are calculated. Some factors are uncontrollable, such as age—generally, younger drivers will pay more than older drivers. Others are controllable, including someone’s driving record, credit score, and state of residence. Car insurance requirements vary from state to state, with factors like state laws and crime rates playing crucial roles in rate calculation.

So what makes Michigan’s car insurance rates the highest in the nation?

While there are a few reasons the Great Lakes State has held the number one spot on Insure.com’s list for 5 of the last 8 years, the main cause is Michigan’s unique no-fault car insurance system. “No-fault” means car insurance policyholders in Michigan must cover their own injuries that result from a car accident, regardless of which driver was at fault for the crash. Because of this, Michigan car owners are required to buy personal injury protection, or PIP, to cover injury costs for both the policyholder and their household residents if they are hurt in an auto accident, whether while driving or as a passenger in another vehicle. It can also cover the policyholder’s passengers who don’t have PIP. Unlike other states that put a limit on the PIP amount, Michigan guarantees unlimited lifetime medical benefits to those injured in an auto accident.

Insurance fraud is another contributing factor. About 10% of all MI no-fault claims are fraudulent, costing residents around $100-200 in premiums each year, according to the Michigan Insurance Fraud Awareness Coalition. About 21% of Michigan motorists are uninsured, which means there are fewer people paying premiums to help balance what the car insurance companies cover.

The bottom line: for Michigan drivers, mandatory no-fault coverage ensures that the state is, again, at the top of a very undesirable list.

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