The laws surrounding homeowners insurance or home insurance (as it is legally referred to by the state of Michigan) are not complex by any means. Michigan has purposely kept laws surrounding home insurance simple while still putting guidelines in place to ensure nearly every home in Michigan is eligible for insurance.
Is Home Insurance Required By Law In Michigan?
Unlike other forms of insurance, such as health and auto insurance, home insurance is not required by law in the state of Michigan. That being said, you may still be required to purchase homeowners insurance if you financed or will be financing your home via a mortgage.
The mortgage lender will likely require you to purchase insurance in order to protect the lender’s financial interest in your property. If you fail to provide proof of insurance to your lender, the mortgage company can purchase a home insurance policy on your behalf. Premium payments will be made through the escrow account.
Different states regulate premium rates with varying degrees of regulation. Michigan does not require providers to pre-approve their rates with the state. Insurers can set their own premium rates.
Eligibility Requirements For Home Insurance
Michigan law protects consumers’ rights to obtain home insurance by clearly defining eligibility for home insurance along with valid and invalid reasoning for insurance denials. Generally speaking, a resident is eligible for home insurance as defined by the state if they are an owner or tenant of one of the following categories of dwellings:
- A house
- A condominium unit
- A room
- An apartment
- A cooperative unit
- Multiple units of a dwelling (not exceeding 4 units)
Nevertheless, even if this requirement is met, an individual can still be considered ineligible if certain conditions exist.
Valid Reasons For Homeowners Insurance Denials
You can legally be denied home insurance for any of the following reasons:
- The property your trying to insure is used to conduct illegal or dangerous activity
- You have been found guilty of arson or an attempt to commit arson within the last five years
- An insurance company has denied a claim from you with evidence of fraud, arson, or conspiracy to commit arson or fraud
- Property taxes for the property you want to ensure are two or more years past due
- You refuse to buy the minimum coverage amount for the policy you want
- Your home insurance has been canceled because of non-payment on the premium within the past two years
- The value of the property does not meet the minimum requirements for the policy you want
- You refuse to become a member or maintain a membership for a group, club, or organization that the insurance company requires you to join
- Your home has a physical condition that presents an extreme likelihood of significant loss under a home insurance policy
If you are denied home insurance, you may still be able to get coverage. You can ask your agent to apply to the Michigan Basic Property Insurance Association (MBPIA). The Michigan Basic Property Insurance Association was organized in 1968 to offer basic property insurance to residents who may be ineligible in the regular market.
Invalid Reasons For Homeowners Insurance Denials
While there are many reasons an insurance company can rightfully deny you coverage, there are also many reasons an insurance company cannot refuse you coverage for under Michigan law. An insurance company cannot legally deny you coverage based on:
- The age of your home
- The location of your home
- The type of neighborhood your home is located in
- Your refusal to purchase auto insurance with the same company
If an insurer denies you coverage due to any of the aforementioned reasons, they can be subject to penalties from the state.
Types of Policies
There are ultimately two types of home insurance policies: replacement cost policies and repair cost or market value policies. Replacement cost policies are typically what people associate with standard homeowners insurance.
Under a replacement cost policy, the amount you pay for insurance equates to how much it would cost to replace, rebuild, or repair your damaged property to its original condition with the same kind of materials and quality.
In contrast to replacement cost policies, repair cost policies will cover replacing, repairing, or rebuilding your property to restore it to a similar condition with contemporary materials instead of the same exact materials. For instance, old plaster walls would be restored using drywall instead of plaster under a repair cost policy. Insurance companies that choose not to offer you a replacement cost policy must offer you a repair cost policy instead.
Minimum Insurance Amounts
The state of Michigan has set a minimum threshold for insurance companies to be able to deny policies for. If your property is worth less than $35,000, a company can legally deny you a replacement cost policy. Similarly, if your property is worth less than $15,000, you can be denied a repair cost policy. You can also be turned down if you refuse to buy a policy that will cover at least 80% of the replacement cost of your property for a replacement cost policy or 100% of the property’s market value for a repair cost policy.
The Benefits of Purchasing Home Insurance
While home insurance isn’t required by law, it is in every home owners best interest to consider the benefits that a home insurance policy could provide. Accidents and events occur that are out of our control.
Storms, fire, vandalism, and theft can destroy or damage the home you’ve spent your life building or the items inside of it. Guests can also have accidents that leave you liable for medical bills and legal expenses. Having to pay for repairs, medical bills, or court expenses out of pocket can be financially crippling. Home insurance provides peace of mind so you can rest easy knowing you’ll be prepared in the event disaster ever strikes.
Doyle & Ogden is an independent insurance agency that has been providing Greater Grand Rapids homeowners with home insurance since 1958. Contact Doyle & Ogden today by filling out a contact form or calling (616) 949-9000 to speak with an agent and get the best coverage at the right price.