Michigan business insurance requirements

Michigan is one of the states that does not require workers' compensation from the very first hire: the rule kicks in at three employees, or at one employee who has worked full time for 13 weeks. There is no state fund, and Michigan sets comp pure premiums through its own data collection agency rather than NCCI. Its auto system is the outlier, though: no-fault benefits, $1 million of property protection and default bodily injury limits of $250,000 and $500,000 make commercial auto here different from anywhere else.

Workers' compensation requirements

The Workers' Disability Compensation Act covers every public employer and any private employer that "regularly employ[s] 3 or more employees at 1 time." A smaller private employer is covered if at least one employee has worked for it 35 or more hours a week for 13 weeks or longer in the preceding 52 weeks (MCL 418.115). Agricultural employers have their own thresholds. Count carefully: a two-person shop with one full-timer is covered. Since 2013 the state has used the IRS 20-factor test to decide who is an employee (418.161(1)(n)); see independent contractors and workers' comp: the misclassification risk.

Owners can be carved out in several ways. A sole proprietor is not an employee. A policy can exclude named partners and the employer's spouse, child or parent by endorsement. In a corporation with no more than 10 stockholders, an officer who owns at least 10% of the stock may elect exclusion with board consent by written notice to the carrier, and the same rule applies to manager-members owning at least 10% of an LLC with no more than 10 members. If the excluded people are the only employees, they file the election with the agency director instead (418.161(2)-(5)). See can owners and officers exclude themselves from workers' comp?.

Contractors inherit their subs' gaps. If a principal hires a contractor that is not insured, the principal owes comp to the contractor's injured workers as if it had employed them directly, with a right to recover from the contractor (418.171). Collect a certificate of insurance from every sub, and expect the premium auditor to pick up uninsured subcontractor payroll.

Going uninsured is a misdemeanor punishable by a fine of up to $1,000, up to six months in jail, or both, and each day is a separate offense. Worse in practice, an injured employee of an uninsured employer can sue in tort, where the employer cannot argue the worker's ordinary negligence (418.141), and the state can recover from the employer what its uninsured employers' security fund pays out, with corporate officers and directors personally liable for any shortfall (418.641).

Michigan has no state fund. Every comp insurer must participate in the Michigan Workers' Compensation Placement Facility, which covers employers "unable to procure the insurance through ordinary methods" (MCL 500.2301). The Compensation Advisory Organization of Michigan collects data and publishes advisory pure premiums; its August 13, 2026 circular puts the average change for January 1, 2027 at 0.0%, ranging from a 2.2% decrease for contracting to a 4.2% increase for office and clerical classes (CAOM). For the basics, see workers' compensation insurance: how it works and assigned risk and residual markets for workers' comp.

Disability and paid leave mandates

Michigan has no state disability insurance program and no paid family and medical leave program. Employers that want to replace income during an employee's illness or leave do it voluntarily, typically with group short-term disability. Multistate employers with workers in neighboring leave states should check state disability and paid family leave programs: every mandate in 2026.

Commercial auto requirements

Michigan's no-fault law shapes every business auto policy. Since July 2, 2020, a policy must carry bodily injury limits of $250,000 per person and $500,000 per accident, plus $10,000 for property damage, unless the named insured signs the state form choosing lower limits, which can go no lower than $50,000 and $100,000 (MCL 500.3009). No-fault property protection insurance pays for damage the vehicle does to other people's tangible property in Michigan, up to $1 million per accident (500.3121). Interstate for-hire carriers need at least $750,000; see FMCSA insurance requirements and filings for motor carriers and commercial auto insurance: what it covers and what it leaves out.

The business insurance market in Michigan

Severe convective storms, flooding and ice drive property losses. FEMA declared major disasters for storms and flooding in Wayne, Oakland, Macomb, Washtenaw and Ionia counties in June 2021 (DR-4607), the March 28 to 30, 2025 ice storm across northern Lower Michigan (DR-4880), and storms, tornadoes and flooding that began April 10, 2026 (DR-4925). Basement and sewer backup losses from urban flooding need specific endorsements; standard forms exclude flood, and NFIP commercial policies top out at $500,000 building and $500,000 contents, with the program authorized only through December 11, 2026 (FEMA).

The Michigan Basic Property Insurance Association, the state's FAIR Plan, writes basic property insurance on qualified real and personal property at fixed locations that cannot be placed in the standard market (MCL 500.2901; MBPIA); see FAIR Plans and residual markets for commercial property. Surplus lines licensees pay a 2% tax and a 0.5% regulatory fee on premiums written, with sworn statements due February 15 and August 15 (MCL 500.1905); see surplus lines taxes, stamping fees and diligent search.

Liability law that affects premiums

Michigan reduces damages by the plaintiff's percentage of fault, and a plaintiff whose fault exceeds the combined fault of everyone else still recovers reduced economic damages but gets no noneconomic damages (MCL 600.2959). That keeps pain-and-suffering awards off the table in many premises and auto claims where the injured person was mostly to blame.

Injury and property damage suits must be filed within three years (MCL 600.5805(2)); breach of contract claims generally within six (600.5807(9)).

Insurers based in Michigan

• Auto-Owners Insurance has its home office in Lansing and wrote $7.64 billion in commercial lines in 2025 by NAIC data.
• AF Group, parent of Accident Fund, is a Lansing-based workers' comp specialist ($2.73 billion); Blue Cross Blue Shield of Michigan agreed in February 2026 to sell it to Enstar.
• Frankenmuth Insurance is headquartered in Frankenmuth and writes business and personal lines ($920.0 million).

Where to get help

• Department of Insurance and Financial Services (michigan.gov/difs): toll free 877-999-6442. File a complaint against an insurer or agent online through DIFS; it also licenses surplus lines agents.
• Workers' Disability Compensation Agency (michigan.gov/leo/bureaus-agencies/wdca): 888-396-5041. It verifies coverage, handles owner exclusion filings and resolves claim disputes.
• Compensation Advisory Organization of Michigan (caom.com) for pure premiums, experience rating and Placement Facility applications.

Confirm your obligations with the agency or a licensed broker, and compare states with the workers' comp and benefits requirements by state.