What is Michigan Basic Insurance? Who Should Buy It?

Michigan Basic Property Insurance is insurance sold by the Michigan Basic Property Insurance Association (MBPIA), a state-run organization, to Michigan homeowners and renters. Michigan basic insurance is designed for homeowners who are denied or otherwise unable to purchase property insurance from standard home insurance companies. The most common reason for homeowners to purchase insurance Michigan basic insurance is that they own a high-risk property that typical insurance companies decline to insure, or receive quotes that are prohibitively expensive.

Who Should Consider Buying Michigan Basic Insurance?

Technically, anyone who is eligible to buy insurance on the regular market can also buy insurance from the MBPIA. However, the most common type of homeowner who should consider doing so is one who was unable to find insurance on the primary insurance market. This may be because they were denied coverage from regular insurance companies, or because other insurers are charging prohibitively high rates. Michigan Basic Insurance is Michigan's FAIR property insurance option and is considered part of the residual insurance market. It's part of a nationwide set of programs designed to help homeowners insure high-risk homes.

Reasons for Home Insurance Denial in Michigan

Per Michigan state law, if an insurance company denies you home insurance coverage, it must explain the reasoning in writing, and the decision must not be made based solely on your home's location, age or neighborhood.

Possible Reasons Why Home Insurance Companies May Deny Coverage in Michigan:

  • Within the last five years, you were convicted of arson, use of explosives or destruction of property.
  • Within the last five years, you were denied a home insurance claim due to evidence of arson, use of explosives or destruction of property.
  • The property is used for illegal or dangerous purposes
  • You refuse to meet the minimum required coverage amount.
  • Within the last two years, your home insurance has been canceled for premium nonpayment.
  • The dollar value of the property you want to insure is below certain minimums.
  • The property taxes on the property are more than two years overdue.
  • You are not a member of the organization for whom the insurance is exclusively available (such as AAA or labor union).
  • Your property is in poor physical condition.
  • Your property is not occupied.
  • Your property is in close proximity to a notable hazard, such as a large body of water.

It may also be the case that the quotes you receive from a regular insurance company are prohibitively high due to certain risk factors, such as a high likelihood of your home being destroyed from a disaster. While this type of high-risk area is less common in Michigan than coastal states like Florida or Texas, you may still find that your rates are still high based on criteria such as crime statistics. If that's the case, you may be able to find a more affordable rate from the MBPIA than the regular home insurance market.

However, it's worth noting that the rates for insurance available through the Michigan Basic Property Insurance Association are generally equal to, or greater than, the rates available from private insurers. This is to encourage homeowners to consider a Michigan basic insurance plan only as a last resort. So it's essential that you shop around from several homeowners insurance companies in order to find the best insurance provider for you.

What Does Michigan Basic Insurance Cover?

Coverage types available from the Michigan Basic Property Insurance Association include standard form homeowners insurance (HO-3), renters insurance (HO-4), condo/co-op insurance (HO-6) and basic form homeowners insurance (HO-2). For a full breakdown of what's included in each type of insurance, click here. The MBPIA also allows its customers to supplement their insurance with coverage for specific types of water damage, for an additional cost.

Additionally, insurance customers have the option to choose from "actual cash value," "replacement value" or "repair value" coverage. An actual cash value policy will have the lowest premium but also provides the lowest payout in case of a claim. A replacement value policy provides the most generous coverage, but it also costs the most on a monthly basis. A repair value or market value policy is in the middle between these two and is especially worth considering if you have an older home with older construction or features that you're not concerned about preserving.

Replacement typeDetailsClaim ExampleGood for…
Actual cash value policyPays the depreciated cost of the property or itemDishwasher purchased new for $500 three years ago; replaced for current value of $200Lower premiums
Replacement value policyPays for new cost of identical itemDishwasher purchased new for $500 three years ago; replaced for full value of $500Greatest peace of mind
Repair/market value policyPays for new cost of identical item or equivalent using "contemporary materials," whichever is cheaperAntique table purchased 40 years ago for $50, but has current value of $2,000; replaced with modern version for $500Compromise between cost and comfort, especially if you have items with high replacement value

As is typical for residual market insurance companies, the extra coverages, benefits and discounts available from the MBPIA are somewhat limited when compared to typical insurers. For example, you won't be able to qualify for discounts for bundling home and auto insurance, purchasing eco-friendly technology or being claim-free for multiple years. Depending on your home or renters insurance coverage needs, you may be better off going with another company that can provide you with a wider range of services.

How to Buy Michigan Basic Insurance

Michigan basic insurance is only available through licensed independent insurance agents. To get a quote, contact an independent insurance agent in your area, and they'll submit a quote request on your behalf. They'll also request quotes from other insurance companies for you.

If you're considering a Michigan basic insurance plan because you're unable to get affordable coverage from another insurer, you should take extra care to shop around from several of the best insurance companies in Michigan. Michigan basic insurance is typically not the cheapest option for homeowners, even if some insurance companies aren't willing to cover you.

Michigan Basic Property Insurance Eligibility Requirements

If you decide home insurance from the MBPIA is the best option for you, you'll need to meet a few qualifications, though they are fairly straightforward. You only need to own or rent a property that meets Michigan building codes and is not used for farm, business or illegal activities. You may be required to have your property inspected to verify that it meets these requirements, though the inspection is free.

If you do not meet the requirements to receive Michigan basic insurance, you will receive a written notice explaining why you don't qualify. It'll also cover what you can do to meet the qualifications and purchase homeowners insurance coverage.

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