Auto insurance prices determine the rate of automobile ownership. According to the US Treasury Department’s Federal Insurance Office, when insurance premiums exceed two per cent of the median household income in a state, auto insurance is deemed unaffordable. Auto insurance rates differ between states due to various factors, such as accidents, injuries, and deaths in the state. Michigan has the highest auto insurance rates in the US. This paper compares Michigan’s auto insurance rates to other states in the US and evaluates insurance coverage and policy types in the state.
Michigan has the most expensive automobile insurance in the US. Cooney et al. (2019) reported that the annual premium in Michigan is almost double the national average at $2,610. Consequently, low-income communities are unable to purchase vehicles, while those that can afford them drive uninsured, exposing themselves to financial risk. The high auto insurance rates are associated with the high traffic fatalities recorded in the state. The National Highway Traffic Safety Administration (NHTSA) (n.d.) reported 0.95 fatalities per 100 million vehicles driven in Michigan, compared to the national average at 1.13 fatalities per 100 million vehicles driven per mile. Additionally, 1471 drivers, 143 motorcyclists, and 142 pedestrians were involved in fatal accidents in 2018. Therefore, high traffic fatalities influence the high cost of auto insurance in Michigan.
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Each state has minimum insurance requirements that are enacted by law for its residents. In Michigan, the minimum car insurance requirements are bodily injury liability per person, bodily injury liability per accident, and property liability per accident at $20,000, $40,000, and $10,000, respectively (Araujo, 2020). Additionally, I have a $1500 medical payments coverage. The coverage saves on medical costs since it would cover my passengers and me in case of an accident. I pay an annual insurance premium of $1,277. I can reduce this premium can by raising my deductible (Kess et al., 2017). Saving on car insurance requires due diligence before purchasing premiums.
Conclusion
Auto insurance rates depend on accidents, injuries, and deaths rates. Michigan has the highest auto insurance rates in the US. High traffic fatalities in the state influence the high auto insurance premiums.
References
Araujo, M. (2020, July 29). Understanding minimum car insurance requirements: State by state list of minimum car insurance requirements. The balance. https://www.thebalance.com/understanding-minimum-car-insurance-requirements-2645473
Cooney, P., Phillips, E., & Rivera, J. (2019). Auto insurance and economic mobility in Michigan: A cycle of poverty . https://poverty.umich.edu/files/2019/05/auto_insurance_and_economi c_mobility_in_michigan_2.pdf.
Kess, S., Grimaldi, J. R., & Revels, J. A. (2017). Covering risks through property/casualty insurance. The CPA Journal , 87 (9), 66-70.
National Highway Traffic Safety Administration. (n.d.). Traffic safety facts annual report tables. https://cdan.nhtsa.gov/STSI.htm
