The national Homeowners guide covers the ISO HO forms, Sections I and II, and the coverages, perils and exclusions. This guide covers the home insurance rules in chapter 21 of the Insurance Code (MCL 500.2101 on), known as the Essential Insurance provisions. They decide who is eligible, which underwriting rules are allowed, the repair cost option, termination notices and the Michigan Basic Property Insurance Association.

Who is an "eligible person" for home insurance (MCL 500.2103)

Home insurance covers an owner-occupant or tenant of a house, condominium or cooperative unit, room or apartment. That includes an owner-occupant of a building with no more than 4 residential units. It does not include insurance for commercial, industrial, professional or business property or liability (2103(3)).

Insurers must write eligible persons. A person is not eligible if he or she:

• was convicted of arson or conspiracy to commit arson in the past 5 years
• wants to insure a dwelling used for an illegal or demonstrably hazardous purpose
• refuses to buy at least 80% of replacement cost under a replacement cost policy
• refuses to buy 100% of market value under a repair cost policy
• refuses to buy 100% of actual cash value under a renter's policy
• had a home policy cancelled for nonpayment in the past 2 years, unless the full premium is paid before issue or renewal
• has property taxes on the dwelling delinquent 2 or more years

Underwriting rules (MCL 500.2117, 2119, 2121, 2027)

• An eligible person can't be denied home insurance solely because of the age of the house, its location or the type of neighborhood (2117; DIFS homeowners guide).
• Physical-condition rules must be objective, tied to the perils insured, based on specific code or manufacturer standards, and applied without regard to age. A certificate of compliance or occupancy creates a rebuttable presumption that the home meets them.
• Claims history: an insurer may nonrenew after 3 paid claims (other than liability claims) meeting statutory dollar amounts within the preceding 3 years.
• Vacancy: rules may address a dwelling unoccupied more than 60 days with evidence of intent to keep it vacant.
• Underwriting rules must be in writing, applied uniformly statewide, and filed with the Director (2119).
• Inspections can't be selected based on race, sex, marital status, age, residence, disability, lawful occupation and other listed factors (2121).
• Location may be used in property rating only when it has a statistically significant relationship to fire loss within a single ZIP code area (2027).
• Home insurance rates may be used as soon as they're filed (2106).
• A senior discount plan for people 55 or older is allowed if applied uniformly (2111d).

Replacement cost and repair cost (MCL 500.2826, 2827, 2117(4))

• A replacement cost policy may pay the replacement amount only after the property is actually repaired, rebuilt or replaced, at the same or another site (2826).
• Repair cost coverage restores property to a similar condition using conventional, currently available materials and methods. For example, plaster walls can be replaced with drywall.
• Repair cost premium can't exceed 105% of the premium for 80% replacement cost coverage.
• The insured may always choose a cash settlement at actual cash value (2827).

Termination notices (MCL 500.2123, 2833)

• Except for nonpayment, an insurer ending a home policy must deliver or mail written notice at least 30 days before termination. The notice must state the effective date and each specific reason.
• A notice mailed within the first 55 days after the policy first issues may take effect in 20 days.
• The fire policy provisions also require at least 10 days' written notice of cancellation. The notice must say any excess premium not tendered will be refunded on demand (2833).

Applicant rights (MCL 500.2112–2122)

• An applicant who is declined is told each specific reason, in writing if the application was written. An oral explanation may be given if the request was oral, with a written explanation available on request within 90 days (2122).
• Refusing to give someone an application counts as a declination.
• A person who disputes an insurer's action is entitled to a private informal managerial-level conference with the insurer, and then may ask the Director to decide (2113).
• Agents must give eligible persons a quote and say how many insurers they represent (2116).

Michigan Basic Property Insurance Association (MBPIA)

The Legislature created the MBPIA to provide property insurance to people who can't find it in the regular market (MCL 500.2920). Any licensed agent can help a client apply (DIFS homeowners guide).

Other DIFS points

• Homeowners insurance isn't required by law. A lender will require it and may force-place coverage and charge the borrower.
• Flood is excluded. It's bought separately from the NFIP or a private insurer.
• Water backup and sump pump overflow coverage usually must be added.

Common exam traps

• Home insurance covers owner-occupants of buildings with up to 4 units, and tenants. Business property isn't included.
• Eligibility requires buying 80% of replacement cost, 100% of market value (repair cost) or 100% of ACV (renters).
• Age of the home, location or neighborhood alone can't be the reason for a denial.
• Termination notice: 30 days with specific reasons. Within the first 55 days: 20 days.
• Nonrenewal for claims: 3 paid claims in 3 years.
• The MBPIA is Michigan's residual market for property.