The Michigan Department of Insurance and Financial Services (DFIS) regulates the different types of disaster insurance policies. Wildfires, floods, tornadoes, severe storms, tropical cyclones, hail storms, and earthquakes are natural disasters that may occur in Michigan. Although Michigan is considered to be in the region that experiences the least natural disasters in the United States, recent research has shown that more natural disasters are likely to occur more frequently in Michigan. In the near future, more flooding-related disasters would occur in Michigan due to high precipitation, snowmelt, rising sea levels, and heavy rains. The DFIS also provides education and natural disaster awareness through the “Michigan Prepares” initiative of the state government on how residents can safeguard their properties ahead of a natural disaster.
In Michigan, most disaster/catastrophe insurance policies are purchased separately as individual insurance policies. These policies only cover the damages resulting directly from the particular natural disaster described in the policy contract. Therefore, it is important for residents to purchase disaster insurance policies for disasters peculiar to Michigan. It is impossible to claim coverage for damage caused by a different natural disaster. For example, earthquake insurance can not be used to claim damages caused by a windstorm.
Michigan residents are susceptible to flooding and can ascertain the minimum floodplain standards and the flood risk of their neighborhood by looking up their addresses on the FEMA Flood Map Service Center. Residents can also check the website of the National Weather Service for active tropical cyclones in their communities. It is important to note that whether residents are in a high-risk flood zone or not, flood insurance remains a necessity, especially during flood seasons. This is because most homeowner insurance policies don't cover damages resulting from floods. A Michigan-licensed P&C insurance agent can advise you on the best disaster insurance policy that would serve your needs in the event of a disaster. Michigan residents can search and verify their prospective insurance agent’s license number on the DFIS website or by calling the department on (877) 999-6442.
Disaster insurance is an insurance policy that protects individuals from financial losses caused by specific natural disasters. These disasters include but are not limited to floods, earthquakes, tornadoes, sinkholes, tsunamis, windstorms, thunderstorms and lightning, winter storms, etc. Natural disasters are typically not predictable, although certain technologies exist that can predict the speed, size, and magnitude of natural disasters. For example, the National Weather Service can detect hail using radars. Seismographs detect earthquakes, while doppler radars are used to detect the rotation of storm clouds, wind direction, wind strength, and precipitation and also measure hail size. The National Hurricane Center (NHC) predicts some natural disasters like tropical cyclones, hurricanes, thunderstorms, etc.
Yes, disasters need insurance coverage to protect against the debilitating damage caused by these natural disasters. Natural disasters are unpredictable and can happen suddenly, leaving no room for property owners to prepare for them. Fixing the damage caused by natural disasters is also very expensive for residents and business owners to bear. For example, one inch of floodwater in Michigan costs a home or business owner at least $10,000 in damage repair costs, while the annual loss estimate for flood-related damage in Michigan is $100 million. An estimate of 10,000 Michigan residents were forced to evacuate from their homes and businesses due to a flood in May 2020. Michigan lost a total of 9,289 acres to wildfires in 2021. Natural Disasters also need insurance coverage because standard residential and business property insurance policies do not cover certain types of disasters like floods and earthquakes.
It is therefore important that property owners in Michigan, especially those who live in Muskegon, Pere Marquette, Chippewa, Cass, and Tittabawassee river basins purchase disaster insurance policies. They should also consult state-licensed P&C insurance agents to help them choose the disaster insurance policy that fits their needs.
Common natural disasters in Michigan include the following:
Floods: Flooding is the most common and most expensive natural disaster. This is because Michigan is home to 11,000 inland lakes flowing through its territorial borders. Flooding is caused by heavy rainfall, spanning several days on end. In 2020, Michigan had 20,500 flood insurance policies amounting to over $4 billion in coverage. A storm surge is also another cause of flooding. It is the unusual rise of water generated by a storm's winds. According to the National Hurricane Center, a storm surge is caused by an increase in the water level generated during a storm. The water level is then pushed towards the shoreline away from the coast by the force of the wind. The effect of this increased water level is flash floods and flooding that destroys properties and displaces people in its path. In 2013, 16 counties in Michigan were given a federal disaster designation as a result of excessive flooding caused by extreme storms and storm surges.
Tornadoes and Tropical Cyclones: Michigan had 17 tornado disasters out of 1,376 that occurred in the United States in 2021 and incurred losses of 17 billion dollars. Tornadoes are not very common in Michigan, but the effect remains devastating. Tropical cyclones originate from the Atlantic basin, including the Caribbean Sea, the Gulf of Mexico, and the Atlantic Ocean, and occur in Michigan on average once every five years. It is responsible for storm surges, extreme winds, and windstorms. According to the National Oceanic and Atmospheric Administration (NOAA), the tropical cyclone season in Michigan begins in June and runs till November.
Thunderstorms and Lightning: A single lightning strike can cause the atmosphere's temperature to reach 54,000 degrees Fahrenheit. In 2021, Michigan had 1,887 claims resulting from lightning-related damage. These claims amounted to $26.9 million, thereby ranking Michigan 10th highest in lightning-related insurance claims in the United States.
Hailstorms: Hail is also a feature of thunderstorms. Hailstorms happen when raindrops freeze due to updrafts lifting rain above the freezing temperature in the atmosphere. These produce copious amounts of hail. Hailstones fall to the earth when the frozen precipitation or raindrops become too heavy for the updraft to hold it up in the atmosphere. Hailstones appear as ice in patterns called hail swaths, which differ in size as the storm moves. Hail-related damage claims paid out in 2020 amounted to $3.1billion. Michigan had a total of 51 hail incidents in 2021
Wildfires: In 2021, Michigan experienced 435 wildfires, which destroyed 9,289 acres. More than four million homes in the United States are at risk of wildfire destruction.
Sinkholes: Sinkholes have very damaging effects on businesses and property owners in Michigan. Sinkholes occur due to chemical imbalances that cause the soil beneath the surface to dissolve into a pool of water. Over time, the soil surface weakens and gives way, leaving a big hole. Sinkholes quicken and worsen soil erosion, reducing the quality of underground water. It can weaken infrastructures such as houses, roads, bridges, and sewer systems and cause them to collapse.
Disasters that are insurable in Michigan include the following:
All natural disasters, including floods, earthquakes, wildfires, tropical cyclones, winter storms, thunderstorms, hailstorms, sinkholes, are insurable in Michigan. Some of these disasters are not covered under some existing residential, and business property insurance policies and have to be purchased as stand-alone policies. The Broad (HO-2) homeowners insurance policy, also known as the named peril policy covers damage from perils such as lightning, windstorms, and hailstorms.
Disaster insurance policies available in Michigan include the following:
Earthquake insurance covers damages on residential and commercial properties in Michigan. Although earthquakes are not very common in Michigan, you should consider getting earthquake insurance, especially if your business or residential property is in an earthquake-prone area. You should talk to a Michigan-licensed P&C insurance agent to weigh your options and get more information about earthquake insurance coverage and other natural disasters. Earthquake insurance can be purchased as a separate policy or as an endorsement to an existing residential or business property insurance policy. Typically, it covers the cost of:
Earthquake insurance does not cover damage to the following:
The National Flood Insurance Program (NFIP) provides flood insurance to Michigan residents who have suffered flood-related damage to mitigate the devastating effects of flood damage. Flood hazard is not included in Michigan's standard residential and business property insurance policies. With the current rise in climate change, increase in heavy rains, and water levels of rivers, lakes, and other water bodies, flood insurance has become necessary for residents and business owners in Michigan. Residents of Michigan can buy flood insurance through:
Michigan residents who reside in any of the participating Michigan NFIP communities can purchase flood insurance from the NFIP. Flood insurance covers claims on damages to the insured property resulting directly from a flood. This includes damage to:
Flood insurance also covers certain damages that are not strictly floods but occur as a direct consequence of flooding; examples of such damages are mudslides, underground water seepage, swimming pool collapse, and sewer blockage.
Flood insurance in Michigan does not cover:
Windstorm insurance policies in Michigan provide protection to residential and business properties from the effects of damage from horizontal winds and wind storms. This coverage includes damage to parts of the buildings such as the roof, walls, windows, and personal belongings. Other windstorm-related claims include:
Windstorm insurance also provides additional living expenses if the windstorm makes the insured building become temporarily uninhabitable due to the storm damage. In Michigan, standard homeowners and commercial property insurance policies cover damages from windstorms.
Sinkhole insurance covers the repairs to residential and business properties resulting from sinkholes. Sinkholes occur due to some chemical imbalance that causes the rock beneath the soil surface to dissolve when rain or snow falls and dissolves through the soil. Over time, the amount of moisture or water in the soil causes these rocks, usually made of limestone, holding the soil together to dissolve over time, leaving a gaping hole behind. These gaping holes pull down buildings, bridges, and other public infrastructure and can be very expensive to repair.
In the United States, sinkholes cause an average of $300 million in damages annually. Sinkhole insurance is not included in homeowner or business insurance policies because of the magnitude of damage it incurs and how expensive it is to repair. Michigan residents with properties and businesses in sinkhole-prone areas should speak to licensed P&C insurance agents for more information concerning getting sinkhole insurance.
The Great Lakes in Michigan collectively contain 20% of the world's freshwater sources, making Michigan susceptible to flooding. Global warming, melting ice caps and rising sea levels increase the flooding risk. In 2021, 9,000 acres of land were burned due to wildfires in Michigan. Lightning hazard insurance claims in Michigan amounted to $26.9 million in 2021.
You should consult a Michigan-licensed P&C insurance agent to discover the common natural disasters in the area you are looking to buy or rent your property and the most suitable option to protect you.
In Michigan, you need disaster insurance if:
The aftermath of a natural disaster can be a very distressing experience. However, you must be careful to avoid making mistakes that would mar your insurance claims. If you are a victim of a natural disaster, you should consider taking the following steps:
Victims of price gouging by unscrupulous contractors can file complaints with the Michigan Attorney General’s Office online or call the office at (877) 765-8388.