Free Property Insurance Basics Study Guide
Michigan Property exam — Property Insurance Basics.
The national guide covers property insurance concepts: perils, hazards, ACV and replacement cost, coinsurance and the common conditions. Michigan sets minimum fire policy provisions in MCL 500.2833. Every fire policy issued in Michigan must contain them, and the exam tests them directly. This guide covers those provisions, Michigan's payment timing and the fire-loss withholding law.
Mandatory fire policy provisions (MCL 500.2833(1))
| Provision | Michigan requirement |
|---|---|
| Coverage | At least actual cash value at the time of loss, for direct loss by fire and lightning |
| Removal | Property moved to protect it from a covered peril is covered pro rata for 5 days |
| Policy period | Effective at 12:01 a.m. standard time at the property's location |
| Fraud | The policy may be void for misrepresentation, fraud or concealment |
| Cancellation by the insurer | Written notice mailed at least 10 days before cancellation. Excess premium not tendered is refunded on demand. |
| Minimum earned premium | The greater of the pro rata premium or $25 |
| Mortgagee | The mortgagee's interest may be cancelled on 10 days' written notice. A mortgagee given notice must file proof of loss within 60 days. The insurer is subrogated to the mortgagee's rights to the extent it pays the mortgagee. |
| Pro rata liability | The insurer pays no more than its pro rata share with other insurance covering the peril |
| Appraisal | On written demand, each side names an independent appraiser within 20 days. A circuit court judge may choose the umpire. An agreement signed by any 2 of the 3 sets the loss. Each side pays its own appraiser and splits other costs. |
| Insurer's options | Repair, replace, rebuild or take the property |
| Abandonment | None allowed |
| Payment | Within 30 days after proof of the amount of loss, except where fire-loss withholding applies (2833(1)(p), 2836) |
| Suit limitation | The time to sue is tolled from the insured's notice of loss until the insurer formally denies the claim |
| Subrogation | The insurer is subrogated to the insured's recovery rights |
Breach of condition: an insurer can't deny a claim for a breach of warranty or condition before the loss unless the breach exists at the time of loss or contributed to it (2836).
Fire-loss withholding (MCL 500.2845)
To make sure fire-damaged buildings are repaired or cleaned up, the insurer holds back 25% of the actual cash value of the real property at the time of loss, or 25% of the final settlement, whichever is less.
- The insurer notifies the city, village or township treasurer, the insured and any mortgagee.
- The money goes to the insured 15 days after the notice is mailed, unless the local unit says within 15 days that it should be held.
Commercial fire and terrorism
- A commercial fire policy may exclude loss caused directly or indirectly by terrorism (2834).
- The federal Terrorism Risk Insurance Program runs through December 31, 2027 under the 2019 reauthorization. It is administered by Treasury with the Federal Insurance Office.
Common exam traps
- Minimum fire policy: ACV, fire and lightning, and removal coverage for 5 days pro rata.
- Insurer cancellation: 10 days' notice. Minimum earned premium: $25.
- Appraisers named within 20 days. A circuit court judge can choose the umpire.
- Payment within 30 days of proof of loss.
- Fire-loss withholding: 25%, released after 15 days unless the local unit objects.
Practice Property Insurance Basics questions All Property topics
Practice questions are study aids generated for exam preparation and are not actual exam questions. Content is provided for educational purposes and is not legal advice. Verify current statutes, rules, and exam specifications with the Insurance Department and the exam administrator before relying on it.
