2.2 Michigan Commercial Property Insurance
Key Takeaways
- Michigan commercial property insurance uses file and use rate regulation
- Surplus lines placement requires diligent search of 3 admitted insurers
- Michigan surplus lines tax is 2% of premium
- Commercial policies must comply with Michigan Insurance Code provisions
- Business interruption coverage follows standard commercial forms
Last updated: January 2026
Michigan regulates commercial property insurance with specific requirements for rates, surplus lines, and coverage availability.
Rate Regulation
Under Michigan file and use system, commercial property insurance rates:
- Are filed with DIFS
- Can be used after filing
- Must be actuarially supported
- Cannot be excessive, inadequate, or unfairly discriminatory
- Subject to DIFS review and potential disapproval
Commercial Rate Filing
| Requirement | Details |
|---|---|
| Filing | Required |
| Approval | Not required before use |
| Review | DIFS reviews after filing |
| Disapproval | DIFS can disapprove after review |
Commercial Property Coverage
Michigan commercial property follows standard forms:
Coverage Types
| Coverage | Description |
|---|---|
| Building | Structure and permanently attached items |
| Business Personal Property | Contents, inventory, equipment |
| Business Income | Lost income during restoration |
| Extra Expense | Additional costs to continue operations |
| Equipment Breakdown | Mechanical/electrical breakdown |
Valuation Methods
- Replacement Cost: Full cost to replace without depreciation
- Actual Cash Value: Replacement cost minus depreciation
- Agreed Value: Pre-agreed amount for total loss
- Functional Replacement: Similar property, not identical
Business Interruption Insurance
Michigan commercial policies include business interruption provisions:
Key Provisions
- Coverage for lost income during restoration period
- Waiting/deductible period typically 72 hours
- Period of restoration clearly defined
- Extended period of indemnity available
- Civil authority coverage for government-ordered closures
Surplus Lines Insurance
Michigan allows surplus lines insurance for risks not available in the admitted market:
Surplus Lines Requirements
| Requirement | Details |
|---|---|
| Diligent Search | Must contact 3+ admitted insurers |
| Surplus Lines Agent | Must use licensed SL agent |
| Surplus Lines Tax | 2% of premium |
| Stamping Fee | Additional fee may apply |
| Disclosure | Must disclose SL status to insured |
Diligent Search Process
- Contact at least 3 admitted insurers
- Document declinations
- File affidavit with DIFS
- Place with eligible surplus lines insurer
- Collect and remit surplus lines tax
Eligible Surplus Lines Insurers
- Must be on DIFS approved list
- Must meet financial requirements
- Cannot solicit business directly in Michigan
- Subject to DIFS oversight
Terrorism Insurance
TRIA (Terrorism Risk Insurance Act)
- Federal program providing terrorism insurance backstop
- Michigan insurers must offer terrorism coverage
- Policyholder can accept or reject
- Disclosure of coverage terms required
Builders Risk
Michigan builders risk insurance:
- Covers buildings under construction
- Available on completed value or reporting form
- Theft coverage may require endorsement
- Transit coverage for materials available
- Contractor or owner can purchase
Test Your Knowledge
How many admitted insurers must be contacted before placing a risk in the Michigan surplus lines market?
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Test Your Knowledge
What is the Michigan surplus lines tax rate?
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