What is Michigan 7-Day Insurance? Should I Get It?

What is Michigan 7-Day Insurance? Should I Get It?

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A 7-day insurance policy is a type of car insurance policy that is exclusively available in Michigan. In theory, 7-day insurance exists so that drivers can take a little more time to find the best deal for longer-term coverage. In reality, most people who buy 7-day auto insurance coverage pay for the week, register or renew their car's registration with the State of Michigan, then let the insurance lapse, while still driving with current registration. We strongly discourage drivers from purchasing 7-day auto insurance, as it far exceeds the cost of regular insurance: it's almost always cheaper to simply switch insurers mid policy.


Why people buy 7-day insurance

There are two possible reasons to purchase 7-day insurance. One is the official — and legal — reason it exists: that you will use the extra time to find the best price you can on a full-length policy. But the far more common — and illegal — reason people buy 7-day insurance is to temporarily receive coverage while they renew their registration, then let coverage lapse afterward.

In the latter case, you would buy a short-term policy in order to register your car with the state. Then, once you've secured your license plates or updated tabs, let your car insurance lapse after the week is over. In theory, a driver could continue to purchase 7-day insurance every week in order to maintain coverage, but this doesn't seem to be very common, as the Michigan secretary of state found that about four in five people who buy 7-day auto insurance don't renew their coverage at the end of the week.

In short, people buy — and then skip out on — 7-day coverage because they can't afford regular car insurance. Michigan is among the most expensive states in the nation for insurance — with a combined average premium of $1,364 per year — because of its extremely generous mandatory PIP coverage. But in Detroit, premiums can easily reach five times that amount or more: Detroit drivers can expect to pay an astonishing $6,197 per year for car insurance. Often, the upfront cost is disproportionately high, as insurance companies require drivers to make a large down payment at the start of coverage.

Why you shouldn't buy 7-day insurance to shop around

The nominal purpose of 7-day insurance may sound logical, but it doesn't hold up to scrutiny, as 7-day insurance is vastly more expensive on a per-day basis than normal car insurance for almost all drivers.

Furthermore, even if you do intend to use the extra time to shop for the cheapest quote, you're still better off buying a normal auto insurance policy. This is because insurance companies will almost always refund unused premiums if you switch companies partway through your policy. A few insurers do charge small fees if you cancel your policy early, but even a small difference in monthly premium will typically eclipse the fee over time and is almost certainly more cost-effective than purchasing a one-week policy.

For example, suppose you buy an insurance policy for the average Michigan rate of $1,364 per year. One week later, you cancel your policy in favor of one that's 10% cheaper ($1,228), and pay a $50 cancellation fee (which is on the high end for a cancellation fee). That works out to a total one-year cost of $1,280.

On the other hand, if you pay $200 for a one-week insurance policy and switch to the same $1,228 plan afterward, your total cost for the year is $1,404 — a $120 difference.

The consequences of letting 7-day insurance lapse in Michigan

It's illegal to drive without car insurance in Michigan and buying a one-week insurance policy, then letting it lapse is treated the same as not buying insurance in the first place. If you're caught driving without insurance, you're subject to a fine of $200 to $500, and repeat offenders may even face jail time.

Furthermore, if you get in an accident in Michigan and aren't covered by insurance, you're responsible for all the expenses of the accident, including the medical bills of the other party. And this is true even if the other party was completely to blame for the accident. So there's a big risk involved in driving without insurance, even if you are a careful driver.

Finally, insurance companies charge higher rates to drivers who have not had continuous coverage or who have recently let their coverage drop. So if you go without insurance now, even if nothing bad happens while you're unprotected, you'll be penalized later.

Who offers 7-day insurance in Michigan?

The only provider of 7-day insurance in Michigan is L.A. Insurance, which is based in Royal Oak and has 103 locations in most major cities around the state, including Detroit, Lansing and Flint. However, the company doesn't provide online quotes for 7-day coverage, so the only way to get a quote is to call an agent or visit a location.

7-day insurance tends to cost $200 to $300 or more from L.A. Insurance, or around $800 to $1,300 per month. In contrast, the average rate for a full-term auto insurance policy in Michigan is $254.91 per month. The average driver would spend 3.5 times more if they bought insurance on a weekly basis, so you're much more likely to save money by purchasing a full policy from an insurer.

Alternatives to 7-day insurance

If you're considering purchasing 7-day auto insurance just to find the cheapest auto insurance rate, it's better to spend an hour collecting quotes immediately to find your best rate. You can even do this on your smartphone at the car dealership or the DMV. And if you do happen to find a better insurance rate after you sign up, most insurers let you cancel with minimal to no penalty.

For people who are considering 7-day insurance because they can't afford to pay a full car insurance premium, look into a no down payment insurance company. No down payment coverage still typically costs more than typical insurance over the course of the policy, but the amount you pay is spread more evenly over that time, minimizing how much cash you need at any time.

Additionally, you should always check with several insurers for their best rates, as they vary significantly based on the provider. For example, in our study of the best rates for car insurance in Michigan, the most expensive insurer, Allstate, charged more than five times as much for a year of coverage than the least expensive provider, MetLife.

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