Auto Insurance in Detroit

According to the US Census, Detroit, Michigan has a high rate of poverty with a population that is 83 per cent black and 39 per cent impoverished.

For auto insurance in Detroit,  one is subject to the most expensive zip code in the United States. This is followed by Philadelphia and Brooklyn. The Detroit zip code 48227 is a 130 percent increase over the Michigan average of $2,226.

A driver’s location is typically used to start the process of calculating when applying for auto insurance in Detroit. This is further followed by the number and severity of the applicant’s car insurance claims in that vicinity. The driver’s driving record, age and the type of vehicle to be insured are further aspects taken into account. Insurance fraud which is rampant in Detroit is an additional factor contributing to high auto insurance in Detroit.

According to approximately 21 per cent of Michigan motorists are uninsured. Detroit’s rate of vehicle theft in 2014 was 1,534 per 100,000 residents, which is seven times the national average. This information was obtained from the FBI and Detroit Police department.

Michigan is among 12 states with compulsory no-fault auto insurance to bypass lawsuits over accidents. It is the only state that requires unlimited medical coverage, which insurance companies have tried to cap for many years. In contrast, New York necessitates $50,000 medical coverage.

Robert Hunter, a director of insurance at the Washington-based Consumer Federation of America made a statement that if he was going to be hit by a car and seriously injured, he would prefer it if it happened in Michigan. However, those people without insurance are barred by Michigan law from suing.

Michigan’s no-fault insurance law became effective in 1973. It requires motorists to carry no-fault auto insurance which provides unlimited lifetime medical benefits for motorists suffering auto injuries and up to
$5,392 per month in wage loss benefits for up to three years, regardless of who’s at fault in an accident. This means your premium rates can go up after an accident, even if you were not at fault.

Critics of no-fault insurance argue it has led to higher insurance premiums because of generous accident benefits and say it encourages risky and fraudulent behaviour. On top of no-fault insurance, drivers in Michigan are required by law to have personal injury protection, property protection and residual liability coverage, all of which add to the costs of auto insurance.

Personal Injury Protection:

  • Benefits are paid to the accident victim by his/her own insurance company. These include the following: –
  • All reasonable and necessary medical expenses
  • Work loss benefits, up to a maximum of $5,189 per month for three years. This is subject to annual cost-of-living adjustment. Higher benefit limits may be purchased.
  • Up to $20 per day, for a maximum of three years for “replacement services”. This pays for services which the injured person can no longer perform.

  • Survivors’ loss benefits and replacement services benefits are paid to the insured’s dependents in case of death.
  • Funeral and burial expense benefits of a minimum of $1,750.

Personal Injury Protection coverage applies to accidents occurring throughout the United States and Canada. It covers you and your family while riding in any car and as pedestrians. Premium costs for this coverage can be reduced by choosing a deductible for medical benefits and a waiting period or deductible for work loss benefits.

Property Protection:

This provides coverage for damage caused by your car to property of others (except moving vehicles), regardless of fault.

  • Coverage is provided up to a $1,000,000 maximum.
  • Vehicles are excluded from coverage, unless properly parked.

  • Property protection does not apply to accidents occurring outside the state of Michigan.

Residual Liability:

This provides protection if you are sued or are legally responsible:

  • In accidents involving death, serious impairment of body function, or permanent, serious disfigurement.
  • When actual economic losses sustained in an accident exceed the benefits available in Personal Injury Protection coverage.
  • In accidents occurring outside of Michigan, for property damage and bodily injury.

The required limits of this coverage are $20,000 for one person’s injury. $40,000 for all persons injured in one accident and $10,000 for property damage. Higher limits may be purchased.

Detroit residents who are hurt in vehicle collisions and have no insurance, risk losing everything. They are forced to turn to Medicaid. The high cost of insurance also shrinks Detroit’s voter rolls because residents register their vehicles at suburban addresses to get lower rates and thus cannot register to vote in the city.

Other factors driving up Detroit’s auto insurance premiums:

Detroit has more accidents on its highways and roads than other Michigan towns and rural areas. Reported accidents account for 7% recorded in Michigan.

Fraud involving therapy and chiropractic schemes is excessive. Dubious medical claims in Detroit jumped 124% between 2009 and 2014. Claims in Detroit accounted for one third of all claims in Michigan in 2014.

The Detroit City Council unanimously approved a contract for an actuarial firm to begin looking into whether the city would be able to feasibly sponsor its own city-run auto insurance company to help drive prices down for residents.

Mayor Mike Duggan recently said that since he moved into the city with his family, his auto insurance premiums had gone up more than $3,000. It has been said that the high cost of auto insurance premiums is one of the key reasons residents have been leaving the city for years.

Whether is is truly possible is an unknown at the present time, particularly after the city just emerged from the nation’s largest municipal bankruptcy. It is certainly worth exploring. If the city can self-insure its residents, saving lots of money would certainly be a welcome change.