Homeowners Insurance in Michigan
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UPDATED: Aug 4, 2020
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So you're a lucky Michigander who has the means to buy their first home. Congratulations! But before you start popping the champagne bottles and celebrating your good fortune, be prepared for a long journey ahead. Purchasing a home isn't easy, and homeowners insurance is an extra complication on top of everything.
Homeowners insurance policies are also sometimes referred to as "forms". The HO-3 form, for example, is one of the most commonly purchased forms in the industry. It provides comprehensive coverage for structural damage, protects your personal property with 17 named perils, and provides coverage for liability and medical expenses. In Michigan, homeowners have more wiggle room to choose how much coverage to purchase, but the industry standard is to suggest that they purchase enough to cover at least 80% of their property's total replacement cost. On a $200,000 home, those limits would be:
|Types of Coverage||Coverage Amount|
|Replacement Cost (Dwelling)||$200,000|
|Replacement Cost (Contents)||$100,000|
Depending on where you live in Michigan, your annual premiums could be below the national average, or astoundingly higher. Grand Rapids homeowners get to enjoy an average home insurance premium which is anywhere from one-third to one-quarter the price of other major metropolitan areas in the wolverine state.
Despite the extravagant prices of homeowners insurance in Michigan, it is possible to help yourself save money by shopping around. Getting quotes from multiple providers can save you a ton by comparing and contrasting the coverage they offer with their annual price. In the chart below, you can see that there are sometimes hundreds - if not thousands - of dollars difference between the most affordable providers, and the most expensive ones.
Laws and Requirements
In truth, there isn't any specific law that forces homeowners to purchase homeowners insurance. But your bank will twist your arm until you do. No, we don't mean literally; they'll include it as part of your paperwork when you apply for your mortgage. Owning your own home, with no debt to any bank, is the only way you'll have any real choice in the matter. But at the end of the day, wouldn't it be nice to know that you'll be financially protected if something happens to your home?
Taking a Home Inventory
Did you know that there are several ways you can save money on your homeowner's insurance by taking a home inventory? It's true! First of all, an accurate home inventory can help you avoid overestimating your home's worth, which means you'll purchase less coverage and have lower premiums. It can also help you avoid underestimating your homes worth. That way, you'll purchase the coverage you need and have to pay less out-of-pocket when your insurance doesn't pay enough for your claim.
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Choosing What (and How Much) Coverage
The basic HO-3 policy that many Michigan home insurance companies offer is really only the tip of the iceberg. On top of your basic policy, there are many other factors to consider. Such as:
- Fires - Luckily, Michigan is one of the states where HO-3 policies cover for fire damage. In addition to fire damage, these policies also cover damage caused by smoke, fires caused by lightning, and any damage caused by an accidental electrical discharge.
- Floods - Unfortunately, Michigan is one of those states where you will have to purchase separate coverage in order to protect yourself from floods. Michigan has more than 3,000 miles of vulnerable coastline, so protecting yourself from flood damage is important. For affordable, reliable coverage, make sure you consult the National Flood Insurance Program (NFIP).
- Damage from Winter Storms - Depending on what part of the state you live in, you might have to deal with anywhere from 30"-200" inches of snowfall per year. And the more snow you get, the more of a toll it will take on your home. Most standard HO-3 forms will protect you from winter storm damage. But just to be safe, be sure to discuss this provision of your policy in detail with your agent.
- Riot Coverage - Yes, riot coverage. This is a fairly standard coverage included in most HO-3 policies. Although riots are more likely to happen in densely populated urban areas, the truth is that they can happen in modest cities as well.
- Covering Your Property - As you may have guessed by now, homeowners insurance protect you from much more then getting the outside of your home damaged. It also protects against damage to any property located on the inside of your home. The basic Michigan homeowners policy allows for coverage and benefits which protect against damage to personal belongings such as Electronics, antiques, artwork, and much more.
- Liability Coverage - Many homeowners insurance policies in many states, Michigan included, account for liability coverage which protects you financially in the event that someone or someone else's property is damaged while on your land.
- Umbrella Coverage - Some homeowners insurance companies, especially if you live in a risky area like Mobile, will only provide so much coverage for your home and belongings. If you own an expensive home, and your insurance company won't provide you the coverage amount that you need, you can always purchase additional protection in the form of umbrella coverage.
Replacement Cost vs. Actual Cash Value
There are two ways your insurance company will pay out on your claims: by giving you the replacement cost of your damaged property, or its actual cash value. In general, the replacement cost refers to any damage to your house's structure. Actual cash value, on the other hand, usually applies to your personal belongings within the home. If you need to repair roof damage, for example, you won't be able to sufficiently repair it unless you get its full value from your claim. But for something like an older, damaged water heater, you might have to settle for the cost of its replacement minus depreciation.
How Your Credit Score May Influence Your Rate
We're sure you are familiar with what a credit check is. But did you know there are multiple types of credit checks? They can vary from industry to industry, and possibly even from company to company. What sort of check they provide can have a serious affect on not just your credit history, but your annual premium as well.
Homeowners insurance credit checks are relatively mild compared to some other industries. One main difference is that they don't perform a "hard" check, so it doesn't leave a mark on your credit history; it's like they were never there. And they won't examine your entire credit history, either; just the good stuff that has happened within the last 7 years or so. On top of everything, they can only examine your credit history with certain companies, like other insurance companies. They can't allow protected forms of debt to factor into your credit evaluation.
For more information, feel free to click any of the links you see in this article. They all lead to more detailed information about homeowner's insurance, specifics on purchasing a policy, and how to find the best deal. You should also contact local resources in your state, such as:
The Michigan Basic Property Insurance Association
Or contact them directly through the following resources:
530 W. Allegan Street, 7th Floor
Lansing, MI 48933
Phone: 517-284-8800 | Fax: 517-284-8837