What Is The Most Important Insurance in Michigan?

Buying insurance in Michigan is important for financial security against unforeseen and unplanned events such as theft, death, or medical emergencies. With important insurance policies like health and residential insurance, your insurance company will cover financial expenses resulting from damaged properties and health issues. Understanding the most important insurance coverages for you and your loved ones will help you avoid huge out-of-pocket payments. Generally, it is best to seek the help of a licensed insurance agent in Michigan before buying any insurance policy. Knowledgeable insurance agents licensed by the Department of Insurance and Financial Services (DIFS) can help you understand basic insurance terms, such as premiums, deductibles, policy limits, and exclusions.

According to the Hierarchy of Insurance Needs, Health Insurance is the most important insurance for everyone.

The Most Important Insurance in Michigan:

HEALTH INSURANCE

Health insurance is an insurance policy that covers the costs of a policyholder's healthcare. Without insurance, medical expenses can be quite expensive. As such, residents are advised to get adequate health insurance to help pay for expected and unexpected medical costs. Different health insurance alternatives are available, whether you're seeking personal health coverage or employee-based health insurance for your workers. The healthcare insurance plan you buy will determine the type of treatment you get and the out-of-pocket payment cost you will make before receiving treatment. Generally, all health insurance plans fall under two categories:

1. ACA-Compliant Health Insurance Plans: Most major health insurance policies are ACA-compliant. This means that such policies conform to the regulations outlined in the Affordable Care Act (Obamacare). Here are some examples of ACA-compliant insurance plans:

• Government-sponsored health plans: These are health insurance coverages provided by the federal and state government. Examples are Medicare, Michigan Medicaid Program, Healthy Michigan Plan, MI Health Link, and MIChild.
• Individual health insurance: This type of health policy allows you to research and customize your health insurance according to your needs. Personal health insurance is often designed for self-employed, unemployed, early retirees, or part-time workers. You can purchase individual health insurance from private insurers or through the Healthy Michigan Plan.
• Employer-sponsored health insurance: These policies are purchased by organizations and companies and then made available to their members or workers.
• Managed healthcare plans: These health insurance policies are covered through contracts with hospitals and healthcare organizations. You may pay less for services thanks to these partnerships. Major managed health plans include Health Maintenance Organization (HMO), Point of Service (POS), Preferred Provider Organization (PPO), and Exclusive Provider Organization (EPO).
• Disability Insurance: This health insurance is for Michigan residents who cannot earn an income due to disability. The Michigan Disability Determination Services (DDS) processes all federal-sponsored disability services for eligible persons. Note that long-term disability insurance is provided by the Social Security Administration (SSA). Michigan residents can only get short-term disability benefits through private insurers.
• High Deductible Health Plans (HDHP): These are health coverages with high deductibles but low premiums. Persons or businesses who can afford HDHP health coverage can access a tax-advantaged Health Savings Account. HDHP plans are set yearly by the Internal Revenue Service (IRS). To be considered a high deductible health plan, the deductible must be no less than a certain amount, which gets adjusted annually: In 2022 it was $1,400 for individuals and $2,800 for families. In 2023: $1,500 for individuals and $3,000 for families.

1. Non-ACA Health Insurance Plans: These health plans do not conform to ACA rules and often have lower premiums. However, this basic health coverage may exclude persons with pre-existing health issues and limited benefits. Some examples of basic health insurance are:

• Short-term health insurance plan: This health coverage is also a form of major health insurance, but it is limited in its scope, acceptance rate, and duration. Since short term health insurance in Michigan is limited to a maximum of 185 days out of any 365-day period, it is typically obtained as a temporary solution by persons who lost their previous health insurance, are temporarily unemployed, and/or looking for significant cost savings. Short-term health coverage is not ACA-compliant, therefore acceptance for this coverage is not guaranteed and certain pre-existing conditions may serve as disqualifiers. With short-term health insurance, individuals can get limited coverage in times of medical emergencies.
• Critical illness insurance plans: This plan is designed for persons with specific life-threatening conditions like cancer, strokes, or heart attacks. Typical health insurance may not cover the exorbitant expenses associated with treating life-threatening diseases. When diagnosed with a critical illness, an individual with this coverage can receive payments from their insurance company. Critical illness insurance covers day-to-day expenses (i.e., travel costs) incurred while treating the disease.
• Indemnity or fee-for-service health plans: This plan is for persons who wish to choose their medical providers and do not mind paying part of their hospital bills. In indemnity plans, the insured is responsible for the remaining balance after the insurer pays a specified proportion of the medical bills.

Why Do You Need Health Insurance?

You need health insurance as a financial tool to ensure unrestricted access to healthcare when you need it, without having to pay for all of the treatment out of pocket. During the younger and healthier years you generally need health insurance to protect you from unplanned medical emergencies and to take care of the annual physicals. But with age you may need to see the doctors more frequently, so health insurance becomes a strategic financial tool to help you plan and manage medical bills into the future.

For example, if you know that you have surgery or an expensive treatment coming up next year and your current deductible is too high, during the open enrollment period you can adjust your health insurance plan and lower the deductible. The monthly cost of coverage will go up, but you could reduce or completely eliminate out-of-pocket deductible costs. Once the planned procedure is done - reassess your needs and adjust the plan again.

Even though health insurance is considered important, 790,000 Michigan residents remain uninsured.

Purchasing healthcare insurance helps individuals fight lifestyle diseases. Diseases like obesity and diabetes result from sedentary lifestyles, smoking, stress, pollution, unhealthy eating patterns, or gadget addiction. In 2020, 18% of Michigan adults were smokers, 34% of the population were overweight, and 35% were obese.

Without health insurance, residents with unhealthy lifestyles may be forced to pay huge sums out of their pockets in the future or be forced to forgo unaffordable treatment altogether. Unfortunately, medical inflation may further increase the burden of healthcare bills if you don’t have adequate insurance coverage. According to statistics by the Kaiser Family Foundation, health costs in the US rose from 0.3% in 2021 to 4.8% in 2022. It is advisable to get health coverage to protect your savings and keep your family safe from increasing hospital bills.

In Michigan, you need health insurance because:

1. It provides 24/7 access to medical care. Whether you purchase the HMO plan on your own or through your company, you can be confident that you will always have access to medical care within the terms of your insurance policy.
2. It helps you pay for treating lifestyle diseases that are now rampant in both old and young residents.
3. You won’t have to worry about the increasing costs of healthcare. By spending a relatively low annual health insurance premium, you will avoid the pressure of medical inflation while receiving quality care without worrying about the expense. Besides, by having health insurance you already save, because you are billed based on rates that were pre negotiated with the insurer.
4. It covers both you and your loved ones, especially dependents like aging parents or young children. With proper health coverage, you won’t have to worry about paying exorbitant hospital bills whenever you are sick.

The 2nd Most-Important Insurance

PROPERTY and LIABILITY Insurance: Personal and Business

Property & liability insurance offers coverage for both property and personal liability. Property owners with this coverage get financial compensation when covered perils damage their properties. This policy also covers medical expenses or legal fees resulting from personal liabilities, such as accidents on the insured property.

Generally, property owners in Michigan are at risk of perils. Perils can be man-made (i.e., theft and vandalism) or natural (i.e., fire, hurricane, flood, or earthquake). According to the 2020 Crime in Michigan Annual Report, Michigan experienced over 130,000 property-related crimes. Out of the total property crimes, 15.5% were thefts from motor vehicles, while 8.8% were thefts from buildings. Individuals and business owners can get auto, residential, and commercial insurance to secure properties from these common perils.

AUTO INSURANCE

Auto insurance provides financial protection for Michigan drivers in the event of damages caused by accidents or thefts. Motorists are generally at risk of accidents, which can occur unexpectedly and may not be influenced by their driving abilities. In other instances, drivers may be at risk of dangers posed by other motorists on the road. An auto insurance policy can compensate you for harm caused by events beyond your control.

Generally, car insurance is required by law in Michigan. The Michigan Auto Insurance Law is designed to reduce cost and increase consumer’s protections. Individuals who are not eligible for car insurance may apply through the Michigan Automobile Insurance Placement Facility (MAIPF). Auto insurance coverage often includes the following parts:

• Personal Injury Protection (PIP): This part covers the driver’s medical bills if they sustain injuries in an accident. It will also cover up to 85% of the possible income a driver would have made if the injury did not occur. Michigan is the only state that allows an option to purchase unlimited PIP.
• Property Protection Insurance (PPI): When an accident occurs, this part will cover financial damages done to other people’s property. If a motorist damages properties while driving, their PPI policy will pay up to $1 million to restore damaged properties.
• Residual Bodily Injury Liability: This part includes bodily injury and property damage; it will protect drivers from being sued by other persons injured in a car accident. As of 2 July, 2020 the minimum required coverage is $250,000 if a person is injured or killed in an accident or $500,000 if several people are killed or injured. (Note: If a permission form is used, the insured may purchase a lower coverage of $50,000 and $100,000)

Note that personal auto insurance often excludes damages from accidents that occur during commercial use. Commercial cars, like delivery vans, dump trucks, and service utility vans, are always on the road and are exposed to more accidents than personal cars. Business owners can purchase commercial car insurance to cover vehicles used for business purposes. With commercial auto insurance, business vehicles are eligible for physical damage and liability coverage.

If an accident occurs, commercial auto liability will cover the repair expenses and/or medical expenses to third parties involved in the accident. On the other hand, commercial auto physical damage provides two coverages:

• Comprehensive coverage, which pays for repairs or replacement when a business car is stolen, vandalized, or damaged in a non-collision accident
• Collision coverage, which pays for repairs or replacement when a business car hits another car, pole, tree, or guardrail

Why Do You Need Auto Insurance in Michigan?

Car insurance is a must if you own an automobile, bus, or truck in Michigan. In 2020, the US Federal Highway Administration recorded over 8 million registered motor vehicles in Michigan. Every motorist is exposed to possible auto crashes while on the road. According to the 2021 Statewide Traffic Crash Data Year End Report by the Michigan Traffic Crash Reporting System, auto crashes increased by 15% between 2020 and 2021. The report also revealed over 70,000 injuries from these accidents and 200,000+ property damage crashes. Due to the high rate of reported accidents, residents living in populous counties in Michigan like Wayne, Oakland, and Kent need comprehensive motor insurance.

Despite the number of auto crashes reported in Michigan, the state had the second-highest percentage of motorists without car insurance in the US. In 2019, the Insurance Information Institute reported that over 25% of drivers in Michigan did not have insurance. Since car insurance is required by law, an uninsured driver may be charged with a misdemeanor, resulting in a $500 fine and a one-year jail sentence. Furthermore, the Michigan Secretary of State may suspend the license of uninsured drivers until they purchase the necessary vehicle insurance.

In Michigan, you need car insurance because

1. It safeguards travelers. Insurance should cover any injuries suffered by passengers in an automobile accident. Liability coverage protects any individuals engaged in the collision.
2. Lease companies and auto lenders often require that you maintain auto insurance on any vehicle you buy or lease from them. This is to protect their commercial interest in the automobile.
3. It can be a complement to your health insurance, particularly in situations when your health plan does not cover certain accidents.
4. It protects your assets. Some accidents result in huge losses that may eventually affect other assets if you cannot pay out of pocket. This is why purchasing auto insurance with larger liability limits is smart for drivers since it is impossible to predict the nature of accidents.
5. It protects your car from financial damages incurred by natural disasters. A comprehensive car insurance policy often includes coverage against disasters like hail, ice storms, and wildfires.

RESIDENTIAL INSURANCE

Residential insurance protects a person's home, furniture, and other belongings from losses and damages caused by covered perils. Covered perils often include theft, vandalism, fire, and other natural disasters. However, standard residential insurance does not include damages caused by floods and earthquakes; residents can add coverage for flood and earthquake losses as an endorsement of their residence insurance policies. An alternative is buying separate flood insurance or earthquake insurance in Michigan.

If a person gets injured on insured residential property, the policyholder’s residential liability coverage will pay for treating the injured guest. Although this policy includes financial coverage for injuries caused by pets, injured pets are not covered under home insurance. Policyholders may need to purchase pet insurance to cover injury to pets.

There are more than 4.5 million houses in Michigan. According to the Essential Insurance Act/documents/mcl/pdf/mcl-218-1956-21.pdf), to be eligible for residential insurance coverage, residents must be in possession of an owned or rented dwelling. Such homes can be single-family homes, multiple dwelling units, condominiums, or manufactured homes. Generally, the type of home you have will determine the type of residential insurance you purchase.

HOMEOWNERS INSURANCE

With 72% of residential real estate in Michigan occupied by live-in owners, over 3.3 million homeowners in 2022 needed residential property insurance to protect their homes from financial damages. Mortgage lenders often mandate borrowers to purchase home insurance to provide a financial safety net against covered perils. There are five types of homeowner’s insurance policies, which are based on the type of perils they cover.

• HO-1 form: The basic homeowners policy covers damages caused by 11 perils. The named perils include fire/smoke, explosions, lightning, damage from vehicles, hail/windstorms, theft, volcanic eruption, aircraft, riots, vandalism, and commotion.
• HO-2 form: The broad homeowners policy pays for damages done to the building and personal possessions. It covers damages caused by 16 named perils and may also include liability coverage. In addition to the 11 perils in the basic form, HO-2 form includes damages from falling objects, accidental water damage, freezing of plumbing, the weight of ice/snow, sudden damage from artificially generated electricity, and sudden damage to household systems.
• HO-3 form: The special homeowners policy is an open-peril or all risk policy. This means it will pay for damages caused by any peril except floods, earthquakes, or perils excluded by the insured. HO-3 policy form only covers the insured’s home structure, other structures, and personal liability.
• HO-5 form: The comprehensive home coverage offers financial protection against all risks except those removed by the policyholder. Unlike the HO-3 form, HO-5 policies include coverage for the insured’s personal properties.
• HO-8 form: This covers older properties that are above 40 years. Typical H0-8 insurance offers similar protection as an HO-1 policy and protects the insured's home, liabilities, possessions, and loss of use against specific hazards.

In Michigan, you need Homeowners insurance because:

1. It maintains the value of your house. The value of a home can rise or fall depending on how well it is maintained and cared for. With home insurance, you can always get money to replace and repair your house, depending on the terms of the policy.
2. It helps prevent financial difficulties due to large out-of-pocket expenses. Rebuilding or repairing a home after damage can be very expensive. With property insurance, you can replace your home without going bankrupt.
3. It covers additional living expenses when your home becomes uninhabitable due to serious damage from a named peril.
4. It pays for repairs or replacement of valuable possessions damaged by covered perils like theft, vandalism, and wildfires.
5. It provides peace of mind and confidence against unforeseen events like theft and fire. If such covered perils occur and your house is affected, the insurance provider will provide proper reimbursement.

RENTERS INSURANCE

Renters occupy 28% of residential dwellings in Michigan. These tenants need renters insurance (HO-4) to get financial protection for their personal properties and liability claims. Some landlords may require prospective tenants to get renters insurance before leasing out their rental properties. This will help them avoid liability claims or property damage claims from a fire or other insured losses.

Purchasing renters insurance is a wise investment, even if you're only moving in or staying in a home for a year. Replacing or repairing your belongings may become a financial burden, especially when the damage is unexpected. Furthermore, you have no influence over your neighbors, regardless of how cautious you are with your own apartment. They may invite hostile outsiders into the building, leave your security gates open, or fall asleep with a cigarette in their hand and start a fire in the apartment building.

It is advisable to prepare for such unforeseen circumstances by buying renters insurance in Michigan. Your insurance policy also includes coverage for additional living expenses (ALE). The ALE coverage pays for the cost of living in hotels while your home is being repaired.

You need Renters Insurance because:

1. It is affordable and provides value, considering the high cost of replacing your damaged possessions out of your pocket. The National Association of Insurance Commissioners estimates that the median renters insurance coverage costs between $15 and $30 monthly. Keep in mind that the coverage amount you require, coverage type, deductible, and location will all affect your final premium cost.
2. It offers liability coverage in case you or another insured party accidentally hurts someone while they are in your house. It will also cover any court judgments and legal fees up to the insurance limit.
3. It provides financial protection for your property while traveling. Wherever you go, your personal properties are protected from damages due to vandalism and other covered losses. Details on what falls under "other covered losses" are available in the policy document. Otherwise, you may speak with a Michigan-licensed insurance agent to help you understand what is included in your renters insurance policy.
4. You can get coverage for temporary housing if your apartment is uninhabitable due to covered perils.
5. It gives you and the landlord peace of mind. Note that your landlord may require that you get renters insurance, so you don’t pass on some responsibilities to them.

CONDO INSURANCE

Condo owners in Michigan need condo insurance (HO-6) to cover the cost of repairing interior areas of their units and possessions damaged by named perils or stolen. Generally, condominiums have jointly-owned shared spaces like the building itself, stairways, sidewalks, and halls. While shared spaces in condominiums are insured under the condo association master policy, owners of each condo unit are responsible for their interior parts. Mortgage lenders may require residents to purchase adequate condo insurance as part of the condo financing application.

Buying condo insurance is beneficial, as most plans often come with a personal liability coverage limit, typically ranging from $100,000 – $300,000. A personal liability policy covers a person's injuries and legal expenditures if they are sued due to a liability event in their condo unit. The coverage also includes attorney fees, court costs, and court settlements. If you need greater liability protection than your normal policy can offer, you can get an umbrella policy, which pays benefits after your policy's liability limit is reached.

You need Condo insurance because:

1. It covers damages done to the interior of your condo, which is why it is also known as walls-in insurance coverage. Examples of the condo interior include floor, internal walls, and sheetrock.
2. It helps you replace or repair personal possessions like clothing, jewelry, furniture, or electronics destroyed by a covered peril.
3. It covers the medical expenses of your guests when they sustain injuries during their stay in your condo. The guest medical payments coverage can assist with paying medical expenditures, including ER fees, doctor bills, and rehabilitation charges, up to your insurance limit.
4. It provides loss of use coverage. The loss of use policy may help with temporary housing and food expenses if a covered loss necessitates a temporary transfer out of your unit. Provided it is included in your condo insurance policy, loss of use coverage often covers the difference between your regular spending and relocation charges.
5. It offers loss assessment coverage. This optional coverage in your condo insurance policy can pay for damages done to shared spaces. Typically, the condo master policy covers repairs and replacement of damaged common spaces. However, if the destruction exceeds the condo master policy coverage amount, each condo owner will have to pay out of pocket to repair the damage. You won’t need to worry about making this payment if you have loss assessment coverage.

LANDLORD INSURANCE

Landlord insurance is for individuals who lease out rental properties to others because homeowners insurance plans do not include coverage for rented residential homes. Insureds who purchase landlord insurance in Michigan can get financial protection over their rental properties and other possessions used to maintain the building. For instance, if the insured's building gets damaged by an accidental fire, the insurance company will bear the cost of rebuilding and repairing the house. Most Michigan insurers provide three types of landlord insurance plans: DP-1/Basic policy, DP-2/Broad form, and DP-3/Special form.

The basic DP-1 policy is inexpensive and suitable for unoccupied or old properties. According to the 2021 Housing Vacancies Statistics, 5.7% (≈75,000+ houses) of all Michigan rental dwellings were vacant. Owners of these unoccupied homes can use this basic policy to cover perils like winds, fires, and lightning. The broad DP-2 policy provides coverage for more perils than the basic policy. On the other hand, the special DP-3 form is more comprehensive as it covers all perils except the ones specifically excluded by the insured. Note that all landlord insurance plans do not include coverage for flood and earthquake damages. This must be purchased as extras.

You need Landlord insurance because:

1. It pays for damages done to your real estate due to covered perils. This includes the cost of repairs or rebuilding the house and any other attached structures, such as a fence, deck, or stairway.
2. It covers lost rental income. Rebuilding your rented property may take some time if it is damaged by natural disasters like windstorms or lightning strikes. While rebuilding the structure, your tenant may not be able to stay in the house and pay rent. The rent you lose due to repairs may be covered by the insurance.
3. It offers liability protection. For example, a landlord may be held liable if a visitor or renter is hurt due to an event on their property. Fortunately, landlord insurance can pay the medical bills of injured persons. It will also cover legal fees if the injured person sues you.
4. It provides coverage for damages done to an unoccupied building. If you include the vacant home coverage as an endorsement to your landlord insurance, you will get paid to repair or rebuild the house, even if it is empty.
5. It is a form of financial security for your rental property against common perils like theft, vandalism, sudden water leaks, and fire.

COMMERCIAL INSURANCE

Commercial insurance (or business insurance) is designed for large corporations and small business owners alike, to protect them against financial losses. As of 2022 there were over 2.6 million business entities operating in the state of Michigan. These businesses are prone to different risks based on what the business does, how many people it employs, what kind of property it owns, the types of liabilities it is exposed to, and so on.

While the most common commercial insurance coverages in Michigan are for general business liability and property protection, cyber liability coverage has been gaining traction due to the increase of use of ransomware and other malicious software. Without a business insurance policy offering cyber liability protection, businesses may suffer data breaches and financial losses worth millions of dollars.

Different commercial insurance plans are designed to meet the needs of different types of businesses in Michigan. Business owners can bundle coverage to save costs or simplify their coverage. Generally, business owner’s policy (BOP), a common type of commercial insurance, combines business property insurance, general liability insurance, and business interruption insurance together.

You need Business Insurance because

1. It prevents business disruptions and downfall. Most small businesses are not able to sustain themselves out-of-pocket if a disaster strikes, thus they need insurance to mitigate this risk. With a properly designed comprehensive commercial insurance policy, your organization can regain lost revenues and continue operations smoothly, no matter how much damage you suffer. Just make sure that your deductibles are set the amounts that the business can afford to pay, if needed,
2. It enhances the company's credibility. Before doing business with a firm, some customers perform research, and one of the things they look at is insurance. Business insurance provides clients with reassurance that a company is reliable and secure.
3. Certain contracts need a specific level of company insurance. You will need insurance if you plan to rent out your business space, and lenders will require your business insurance if you plan to obtain business loans. Business insurance is crucial since certain customer contracts could also stipulate that you have insurance in case something goes wrong.
4. It enhances employees’ efficiency and productivity. Business insurance policies like workers’ compensation insurance and group health coverage are designed to take care of your employees.
5. It protects the business from lawsuits. Companies often face legal actions from customers and employees. If you have a business owners’ policy, you can get paid for legal representation and other court fees.

Commercial insurance in Michigan works by providing:

• Commercial property coverage: This insurance covers the building, business inventory, office supplies, and other tools and machinery used in the business operation. Other external fixtures of the building (fences and signs) are also included in commercial property coverage. Commercial auto insurance protects business owned vehicles, while cargo transit insurance protects the merchandise during shipping. Michigan’s commercial transportation handles 240 million tons of cargo every year, across its roads, rail, air, and water channels.
• Commercial health coverage: Business owners need group health insurance to provide commercial health coverage for their employees. Commercial health coverage spreads out the risk throughout the whole workforce, yielding cheaper rates than what each employee would have to pay if they had purchased individual insurance. Note that Michigan employers with 50 or more employees are required to provide health insurance to their employees and their dependents. .
• Commercial life coverage: More than half of private businesses in Michigan offer group life insurance to employees. Additionally, commercial life insurance coverage can also help business owners recover from losing a key employee or business partner. Often purchased through group life insurance, a commercial life policy plays a vital role in a company’s compensation package to reward and retain valuable workers.
• Workers’ compensation insurance: This insurance is designed to help workers injured on the job pay medical expenses and replace lost earnings. In Michigan, businesses with more than three workers must have workers' compensation insurance. Workers' compensation insurance is also mandatory for businesses in Michigan, with at least one employee who worked a minimum of 35 hours per week for 13 weeks in the preceding year.
• Professional liability insurance: Also known as E&O (Errors and Omissions) coverage, professional liability insurance is intended to assist in defending against claims of job errors, such as missed deadlines and unfinished projects. Another example of professional liability is Medical Malpractice insurance, which is purchased by medical professionals.
• Commercial liability coverage: This covers costs if your company is held accountable for acts resulting in property damage or bodily injury. If your company is sued over such accusations, it also helps with legal expenses.

DISASTER INSURANCE

Disaster insurance, often known as hazard insurance or catastrophe insurance, protects you against unforeseeable natural catastrophes that might damage or completely destroy your house or business. Natural disasters common in Michigan include wildfires, flooding, tornadoes/severe storms, hurricane/winter storms, and earthquakes. Examples of some recorded disasters in Michigan include:

• 17 tornadoes in 2021 without any fatalities
• 10,000+ wildfires every year
• Historical floods that resulted in financial losses worth millions of dollars
• Low magnitude tremors or aftershocks

These disasters can lead to massive financial losses not covered by typical homeowners insurance. Generally, home insurance may cover damages from disasters like fire, storms, lightning, and wind but does not cover devastating hazards like floods and earthquakes. Some P&C (Property and Casualty) insurers allow insureds to include flood and earthquake coverage as a rider policy to their residential property insurance. However, residents in areas prone to certain natural catastrophes may need to purchase relevant disaster insurance as a standalone policy. Floods are the most common disasters and often incur the most expensive damage. Residents may purchase standalone flood insurance or earthquake coverage through the National Flood Insurance Program (NFIP) or a private insurer.

You need disaster insurance because:

1. Financial losses incurred by unexpected natural disasters can be extensive. For instance, according to the Federal Emergency Management Agency (FEMA), an inch of floodwater can result in damages worth $25,000.
2. Natural disasters are unpredictable, even if you reside or own a business in an area with no history of natural disasters. Although disaster insurance is essential for individuals living in high-risk areas, others living in low-risk areas may need some coverage to prepare for unexpected events.
3. It provides extra protection to your home insurance or business coverage. You can include flood or earthquake insurance as a rider to regular property insurance.
4. A regular home or commercial insurance policy will not cover major disasters like floods and earthquakes. With separate disaster insurance, your business or house is properly covered against disasters beyond human control.
5. It provides peace of mind for both policyholders and government agencies. Natural disasters often result in panic as residents and business owners count their losses. However, with disaster insurance, insureds are more confident through the crisis.

3rd Most-Important Insurance - Life Insurance:

According to the Hierarchy of Insurance Needs, the third most important type of insurance every adult in Michigan should have is life insurance.

LIFE INSURANCE

Michigan residents need life insurance as a financial tool while they are alive and as a means to leave money behind once they pass away. Depending on the policy type, life insurance serves its insured during the whole of life or for a limited term. While the insured is alive, their life insurance can act as an alternative retirement planning tool or even as their own private bank with tax benefits. During the terminal illness, some life insurance allows the insured to dip into the death benefit - to help pay for the treatments. When the insured passes away, a beneficiary, selected by the insured, can file a claim to receive the life insurance death benefit. If any benefits were used during the lifetime and not repaid, the owed amount gets subtracted from the death benefit before it gets paid out. The beneficiary receives the death benefit money tax-free, and even though the insured might have left instructions of how it should be used, the beneficiary typically can use the money at their own discretion. Due to this, it is very important to select the right beneficiary, who would follow your final wishes..

Life insurance with death benefits in Michigan may be divided into two parts:

• Individual Life Insurance: It is purchased by individuals as the main life insurance policy which can be adjusted to match the insured’s needs. It can be term life and permanent life insurance.
• Group or Supplemental Life Insurance: Also known as employer-sponsored life insurance, it is offered by business organizations to their workers. This type of coverage typically has limited options and amount of coverage.

With some rare exceptions, term life insurance policies are barebone and only include a death benefit.

Permanent life insurance, on the other hand, also includes a cash value savings account and an option to add a variety of living benefits as options (riders).

Important point to understand about life insurance Cash Value: Cash value (CV) accounts are meant to be used during the lifetime of the insured and should be fully exhausted by the time of death. Any CV funds remaining in accounts at the time of death are usually forfeited in favor of the insurance company. Insureds who purchase life insurance policies with living benefits can take out part of their insurance benefits while they are still alive. The living benefits can provide financial protection when insureds are diagnosed with a chronic, terminal, or critical disease.

It is possible to include living benefits as a rider to your term life insurance policy. An example of a living benefits rider is accelerated death benefits, which pays a part of the insured's term life coverage when they face terminal sickness. Return of premium (ROP) is another living benefits rider that returns all the premiums paid if the insured remains alive after the term life policy expires. Note that not all life insurance policies allow living benefits. Regular term life insurance policies do not have living benefits. Some insurance providers offer permanent life insurance with in-built living benefits, while others charge policyholders extra fees to include living benefits riders.

Getting life insurance early should be included in your retirement plan. The younger and stronger you are, the lower the cost of life insurance. With active life insurance secured before retirement, your dependents can easily fund your funeral and burial expenses and pay off lingering debts. Michigan residents often choose between the following types of life insurance:

• Term-life insurance
• Whole life insurance
• Universal life insurance
• Variable life insurance

You need life insurance because:

1. It covers the burial expenses. No one wishes that their spouse, relatives, or children experience financial hardship after their death, especially considering that funeral expenses may cost tens of thousands of dollars. Purchasing a life insurance policy is similar to a life savings plan. It can help to alleviate the financial burden on family members when the primary earner passes away.
2. It can supplement your retirement plan. Several life insurance plans offer ways to invest the cash value account portion into the stock market and lock in the gains without being exposed for losses. Some plans follow the market index (Indexed Universal Life), while others allow the insured to take on all the risk and invest in their choice of securities (Variable Life).
3. It helps you get tax benefits while you are alive and after you die. a) Using cash value loans to supplement your income during retirement typically does not affect your social security eligibility, b) Life insurance and death benefits are not taxable income. As such, your beneficiaries do not have to pay taxes when they get paid after your death.
4. It protects your family’s financial future. While relying on a fully funded emergency fund is okay, this may not be enough to pay for funerals and other unexpected expenses that may arise after death. This is very important if you are the major provider in your family.
5. It protects your business from crashing after you die. If you've labored hard to establish your own company, a good life insurance policy can keep it afloat in the event of your untimely demise. An insurance payout offers a cash infusion to assist meet payroll, merchandise, and any other immediate financial demands. It is also less expensive than borrowing from a credit union or a bank. Alternatively, life insurance can be used to structure the buy-sell agreement between business partners, where the death benefit is used to buy out the deceased share of the business from their family.

Basic Life Insurance to Cover Final Expenses and Burial

Why Do I Need Basic Life Insurance Policy For Final Expenses?

Death is inevitable and can occur at any time. The primary goal of basic life insurance is to cover your final expenses, which typically consist of funeral costs and any outstanding medical debts you may have. In Michigan, on average 8,000-10,000 people die every month, with heart disease and cancer as the two leading causes. Most of the deaths are among seniors, aged 65 and older.

With nearly half of Americans dying with savings of less than $10,000, a basic life insurance policy can help ensure a proper send off without making the relatives cover the costs.

The two types of basic life insurance policy in Michigan are:

• Term Life - lowest cost
• Final Expense - basic coverage of last resort

The cheapest policy to provide final expense coverage is Term Life, but the older you get, the harder it usually becomes to qualify for coverage. If the senior does not have an existing life insurance policy and no longer medically qualifies for other coverage options, Final Expense (FE) life insurance policy is usually the last option.

Also known as burial insurance, final expense life insurance requires no medical examination and typically offers a death benefit of up to $50,000. A medical evaluation is necessary for some life insurance forms, but not burial insurance. Anyone can get this type of coverage provided their pre-existing health condition is not severe. Individuals with terminal diseases like cancer and diabetes may find it harder to get burial insurance. Basic life insurance for final expenses is affordable with lower premiums. Some policies with coverage amounts between $5,000 and $35,000 cost under $50 per month. Insurers often allow policyholders to choose annual or monthly premium payments. The application procedure is fast and simple, and coverage can occasionally be granted on the same day as the application. Your coverage begins the moment you are accepted.

You need basic life insurance when:

1. You want to prevent your beloved ones from having to pay for funerals, burials, and even unpaid medical bills.
2. You do not qualify for other policies which may offer lower cost and more customization

Discuss your life insurance needs with a Michigan-licensed life insurance agent - who is legally allowed to access your needs and make a professional recommendation of available coverage options.

Cost of End of Life Expenses in Michigan

End-of-life expenses in Michigan include any bills incurred by your loved ones due to your passing. These expenses may include:

• Burial and cremation fees
• Out-of-pocket hospital bills.
• Nursing home fees
• Transportation cost of close relatives
• Price of a wake or any other memorial service that may take place after the funeral
• Various kinds of unpaid debt.

Many people decide to get some sort of life insurance to safeguard their family members because this might place a significant financial load on them.

Average Cost of Funeral in Michigan

Funerals in Michigan can be expensive, depending on the type of funeral service and location. Individuals may spend more or less on Michigan funerals if they include other expenses like

• The cost of purchasing a burial vault, which is sometimes required for interment in a cemetery
• The cost of a memorial or monument for the burial site
• Cash-advance fees for items like flowers or an obituary

In cases where the final expenses insurance may not cover the total burial cost, beneficiaries of the deceased may be eligible for additional funding through the State Emergency Relief (SER) created by the Michigan Department of Health and Human Services (HHS). Once approved, eligible persons can get up to $285 for a burial service only or $520 for a burial service with a memorial service. Total funeral costs in Michigan range from $2,700 to $13,000, depending on the city and county where the funeral is conducted and the level of requested service.

Most Common Types of Life Insurance in Michigan are:

Term Life Insurance: This policy offers life insurance protection for a predetermined period. Prospective customers can choose as high as a 30-year term life insurance or as low as a 5-year term life policy. A term life insurance policy has no accumulating cash value and only pays out if the insured person passes away during the policy's lifespan. The most cost-effective option to get optimum life insurance coverage is often a term life insurance policy. Generally, insurers offer two main types of term life policies: Level Term Policy or Decreasing Term Policy.

• Level Term Policy: provides the predetermined death benefit amount while allowing you to pay the same premium throughout the coverage term. This means your beneficiaries will receive the same benefit whether you pass away in the 20th year or first year of owning the policy.
• Decreasing Term Policy: This policy provides a decreasing death benefit at a predetermined rate throughout the coverage term. This means that your beneficiaries will get a higher death benefit if you pass away early. Decreasing term policy is usually used to guarantee the payoff of a loan that the insured signed for. As the loan principal gets paid off with time, the death benefit shrinks to match it. As a result the cost of the policy also decreases.

Insurance providers in Michigan often use parameters such as your age, health status, gender, and coverage amount to determine how much you will pay for term life insurance. In many instances, you may be required to take a medical exam. Other factors affecting the cost of term life insurance premiums include your driving history, smoking status, employment, family history, and current drugs.

Death benefit, which is tax-exempt, is paid to beneficiaries who file the claim after the insured’s death. Once the policy expires without the policyholder dying, insurance companies will not disburse death benefits to beneficiaries. However, policyholders who include return of premiums (ROP) riders to their term life policies may get all their premiums back if the policy expires while they are alive. Note that including an ROP rider to the term life insurance policy will result in higher premiums.

Final Expense (FE) Insurance: Being a type of whole life insurance, final expenses insurance will pay the death benefit provided the premiums were paid up to the date of death. Seniors over 65 years old may need to get final expense insurance if they cannot qualify for other less expensive coverage. In general, qualifying and purchasing FE insurance in Michigan is easier than any other whole life insurance plans. There are two types of final expense insurance.

• Simplified issue: This type of final expense life insurance is for those who deal with modest health conditions and might not be eligible for life insurance plans. Insurance providers often need applicants to complete health questionnaires, which will be used to calculate the insured’s premium costs.
• Guaranteed issue: This funeral insurance is suitable for those with major medical issues who are not eligible for other life insurance policies. Purchasing guaranteed issue life insurance is fast as requirements do not include medical evaluation, health inquiries, or other health criteria. This plan often offers smaller coverage amounts due to the increased risk, and you may pay much more for your insurance than with a simplified issue policy.

Indexed Universal Life (IUL) Insurance: This type of life insurance policy is common in Michigan since it offers death benefits to your beneficiaries and the opportunity to build wealth while you are still alive. With an indexed universal life coverage, your coverage is permanent, provided you pay premiums. Apart from the death benefits, indexed universal life insurance offers a cash value account that grows depending on the outcome of a chosen stock index.

Similar to 401Ks, IUL’s stock market indexing can offer growth opportunities, and unlike 401K and the likes, which can tumble during the recession, IUL offers a zero-loss guarantee.

IUL insurance can provide flexibility for individuals who want an insurance plan that fits their investment objectives. Policyholders with IUL insurance are free to choose from various riders, allowing them to customize the policies to their needs. They can also pick how much risk they want to incur in the market and alter death benefit levels as necessary. For instance, an insured may decide to include a long-term healthcare rider to pay for nursing facility expenses if required.

The ideal time to get an IUL is while you are young and the cost is the cheapest. The longer you wait, the more you will pay for the same type of policy. The IUL policy's death benefits can be used to pay for the insured's final medical costs, burial costs, debt repayment, daily requirements, college tuition payments, tax-free pension benefits, etc.