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Michigan Car Insurance: Factors that Affect Car Insurance Rates

By Insurance.com Posted : 02/19/2007

If you are a driver in Michigan or anywhere for that matter, you know how complicated and confusing it can be to file a car accident claim, switch car insurance companies or simply add a person on to your policy. To help make things easier when dealing with your auto insurance company, we have listed some helpful tips for Michigan car insurance customers below. Understanding these items can not only save you a lot of time and money on your Michigan auto insurance, but it will also help you be better prepared in the event of a car accident.

1. How your Michigan car insurance company determines your car's value after it has been declared a "total loss"
When totaling your car, your insurance company's goal is to help you find a new car within the same market. To do this, car insurance companies use three different methods for determining the value of the car declared a total loss, such as:


If the car insurance company is unable to find a car from within your area, they may have to find a replacement car outside your zip code, which can dramatically affect your car's true value. For instance, if you reside in a big city within Michigan, such as Detroit, Ann Arbor or Traverse City, then the cost of replacing your car will likely be more expensive then if you lived in a suburb or more rural part of Michigan.

2. Making a car insurance claim could increase your car insurance rates
Typically, insurance companies raise your car insurance rate by 40 percent in the event of an accident. However, some insurance companies will only increase your personal rates as opposed to your entire rate, but that is at the discretion of the insurance company.

If you are a good driver that does not have any driving violations, then you will want to consider going with a car insurance company that offers an "accident forgiveness" or "forgive the first accident" policy. This will help keep your insurance from fluctuating in the event that you file a car insurance claim.

3. When switching car insurance companies, you must cancel your insurance policy first
Though it is possible to cancel your coverage at anytime, it is important to note that many insurance companies require a written statement, including the date of termination, in order to officially close your car insurance policy. If you do not do this, and you receive and ignore the next bill, your policy will be canceled automatically by the insurance agency for delinquency of payment. The downside to this automatic cancellation is that it will show up on your credit record, which could potentially impact your credit score!

The safest thing to do when switching car insurance companies is to call your company and let them know that you are canceling your policy. The company will send you a cancellation request that needs to be filled out and sent back.

4. Adding a teen to your car insurance policy
Most insurance companies do not require you to add your teen to your car insurance policy when they are a certain age, only when they receive their license. On the other hand, if you are in a high-risk pool, you may be required to add them when they receive their driver's permit. If you forget to add your licensed teen, and they are involved in a car accident, they will be covered; however, your insurance company may charge you back premiums from the date your teen received their license.

For your Michigan teen to begin the process of receiving their license, they must complete the following steps:

  1. Pass Segment 1 of the approved driver education course and receive their Driving Eligibility Certificate
  2. Present the Certificate to receive their Level 1 Learner's License
  3. Practice driving with a parent or guardian supervisor
  4. Pass Segment 2 of the approved driver education course
  5. Pass the Road Skills Test and receive their Level 2 License
  6. Practice driving without a supervisor
  7. Automatically receive their Level 3 Full License after all requirements have been met


This process is for first time drivers who are at least 14 years and 9 months old. To ensure that the teen driver receives ample time to practice and to offset the number of accidents that involve teen drivers each year, Michigan has different privileges for each provisional license:

Level 1 Learner's License
Parent or guardian must sign for the teen's driving permit after proof of residency and social security number have been verified by the DMV. Under the Level 1 Learner's License, teen drivers must always drive with his/her legal parent or guardian or a responsible adult. In addition, Michigan teens must complete Segment 1 of the approved driver education course in order to receive their Level 1 Learner's License

Level Two Intermediate License
Teens are eligible for the Level Two Intermediate License after driving with the Level 1 Learner's License for at least 6 months and having completed Segment 2 of an approved driver education course. In order to qualify for the Intermediate License, Michigan teens will need to take and pass a Road Test, which includes a 5-minute test drive on a closed course to test maneuverability and a 30-minute drive on the open road. Before the test is started, the teen's car will be inspected by the DMV to make sure it is in proper working condition.

As long as there are no civil infractions, at-fault crashes or license suspensions before applying, the teen will receive their Level 2 Intermediate License. Under this license, teens are permitted to drive unsupervised between the hours of 5a.m.-12.a.m

Level 3 Full License
Michigan teens are eligible for the Level Three License once they have turned 17 years old, have driven with a Level Two Intermediate License for at least 6 month, and haven't been involved in an accident or violations within the past year. If the teen passes all of the requirements above, their Full License will be mailed to their home.

To learn more about Michigan teen driver laws and regulations, please visit the Michigan DMV.

5. Paying in installments may increase your car insurance
"Fractional premium" fees are usually charged when you divide your car insurance annual premium into installments. Six month, quarterly or monthly are the typical breakdowns for most insurance companies. Generally, the more you break down your installments, the higher the administrative/fractional premium fees are. Always ask when applying for a new car insurance policy and see exactly what the fees are for each payment you break down. Make sure to also ask your insurance provider if they offer an alternative way to make payments, such as Automatic Clearing House (ACH) processing, which withdraws the funds right from your checking account. This may help eliminate processing fees while helping you stick to your budget.

Even though most states typically have similar laws in place for car insurance, they do not typically have similar car insurance rates. That's because Michigan car insurance rates are influenced by Michigan's geographic location and its state laws. With that being said, it is always a good idea to shop around and compare the rates of various auto insurance companies. To assist you in the process Insurance.com offers an auto insurance comparison application. Here, you will be able to evaluate multiple rates from best-in-class insurance providers - helping you find the cheapest auto insurance coverage for your budget.

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