Insurance Laws & Rules In Michigan 

 February 3, 2022


Insurance Laws & Rules In Michigan

  1. Basic Principles of Life, Health Insurance and Annuities
  2. Nature of Insurance; Risk, Perils and Hazards
  3. Legal Concepts of the Insurance Contract
  4. Life Insurance Policies, Provisions, Options and Riders
  5. Life Insurance Premiums, Proceeds and Beneficiaries
  6. Life Insurance Underwriting and Policy Issue
  7. Group Life Insurance
  8. Annuities
  9. Social Security
  10. Retirement Plans
  11. Uses of Life Insurance
  12. Health and Accident Insurance
  13. Health Insurance Providers
  14. Disability Income Insurance
  15. Medical Expense Insurance
  16. Private Insurance Plans for Seniors
  17. Health Insurance Policy Provisions
  18. Health Insurance Underwriting
  19. Michigan Laws and Rules Pertinent to Insurance

Michigan Laws & Rulers


Financial Services

Department of Insurance & Financial Services is a principal department in the Michigan executive branch with responsibility for insurance and financial institutions.

  • Headed Up by a commissioner appointed toa  four year term
  • Has the power to revoke a producer's insurance license


Cease and desist order

The Commissioner may issue a cease-and desist order to any person found to have committed an unfair or deceptive act or has violated a state insurance law

  • Upon a hearing, a penalty of $500 per violation (not to exceed a total of $5,000) may be imposed
  • Upon a hearing, a penalty of $2,500 per violation (not to exceed a total of $25,000) may be imposed if the person reasonably knew he was in violation.

Certificate of authority

The Commissioner will examine the financial affairs of all insurers before issuing a certificate of authority to transact business in Michigan.


The Commissioner will suspend the certificate of authority of any insurer that becomes insolvent, is threatened with insolvency, or is delinquent in claims payment.



A producer is any person who sells, solicits, or negotiates insurance contracts for compensation on behalf of an insurer. This includes submitting applications to the insurer, collecting premiums, and delivering policies to policyowners. Each agency that transacts insurance must be licensed by the insurance department. An insurance producer CANNOT act as an agent of an insurer until the insurance producer becomes appointed by the insurer.


An insurance counselor is any person who, for a fee, offers to examine any policy for the purpose of giving advice or recommendations with respect to the benefits provided by the contract. An counselor must be licensed in the State of Michigan.

Business Entity

A business entity that acts as an insurance producer in any manner (sells, solicits, negotiates, advertises, collects commission) must be licensed in Michigan. The types of business entities that can be licensed in Michigan are corporations, limited liability companies, limited liability partnerships, partnerships, or sole proprietorships.


An applicant for a resident producer license in Michigan must:

  • Be at least 18 years of age
  • Meet the pre licensing education requirement within 12 months of licensure application
  • Have passed the state exam for the lines of authority in which licensure is sought
  • Submit the application with fees

Maintenance & Duration

Producer licenses are renewable biennially (every two years) with fee, renewal application, and proof of completing continuing education (CE). Exceptions are made for producers who are in active military service or other extenuating circumstances by requesting a waiver.

  • Applicant can apply 90 days prior to license expiration date

Nonresident Producers

A producer who holds a resident license in a different state may apply for a nonresident license in Michigan, as long as both states have a reciprocal agreement. To apply, nonresidents must submit an application form, proof of resident license in good standing, and fees.

Nonresident Producer applicants do not have to take the Michigan State licensing exam, but must not have committed any act for which the license could be denied, suspended, or revoked.


A temporary license may be issued in cases where a producer has become disabled or dies, requiring a replacement to service the producer's business. It also can be issued when the producer is actively serving in the military.

  • A temporary license is valid for a maximum of 180 days.

Continuing Education

Resident producers must complete 24 hours of continuing education every 2 years to keep their license active. Of those 24 hours required, 3 hours must be in ethics. Nonresident producers are not required to complete Michigan continuing education requirements as long as their home state requirements are met.


A lapsed license may be reinstated within one year of the suspension date. The requirements include:

  • Reinstatement Application
  • Renewal Fee + Reinstatement Fee
  • Proof of Completion [Continuation Education Requirements]

If the license has been suspended or inactive less than 90 days from the continuation education renewal date, the license will become active when the continuing education credits are reported to the DIFS; a new application is not required.

[Licenses] Probation, Suspension, Revocation, Refusal to Issue or Renew 

The Commissioner may levy a civil fine, place on probation, suspend, revoke, refuse to renew or deny a license to any person who has:

  • Provided Incorrect, misleading, incomplete or untrue information in the license application
  • Violating any insurance laws, regulations, subpoena, or orders from the Insurance Commissioner
  • Obtaining to obtain a license through fraud or misrepresentation
  • Intentionally misrepresent the terms of an insurance contract
  • Been convicted of a felony
  • Committed any insurance unfair trade practice
  • Using fraudulent, coercive, or dishonest practices or demonstrating incompetence, untrustworthiness, or financial irresponsibility in this or any other state.
  • Having an insurance license denied, suspended, or revoked by another state
  • Forging a name to an insurance document or application
  • Cheating on an insurance License examination
  • Knowingly accepting insurance business from an unlicensed individual
  • Failing to comply with a court order imposing child support
  • Falling to pay state income tax

Producer Appointments

The agreement between an insurance producer and insurer under which the insurance producer, for compensation, may sell, solicit, or negotiate policies issued by the insurer is called an appointment. A producer cannot act as an agent for an insurer unless he or she is appointed to work for the insurer.

  • The insurer is required to file a notice of appointment to the Commissioner within 15 days from the date the first insurance application is submitted or agency contract is executed.
  • Upon receipt, the Commissioner has 30 days to verify that the producer is eligible for appointment. If found ineligible, the Commissioner shall notify the insurer within 5 days.

Termination of Producer Appointment

An insurer that terminates an agent appointment must notify the Commissioner within 30 days of the date of termination. Within 15 days of such notice, the insurer must mail a copy of the notice to the terminated agent, after which the agent will have 30 days to submit written comments to the Commissioner.


Address/name change

Producers must report a change in address or name to the Commissioner within 30 days of the change.

Reporting of Actions

Producers must report any bankruptcy, felony conviction, or any other administrative action that occurs in Michigan or another jurisdiction to the Commissioner within 30 days.

Assumed Names

An insurance producer doing busines under any name other than the producer's legal name shall notify the commissioner prior to using the assumed name.

Producer Records

All producers shall maintain full and correct transaction records of the business done by them for a period of 5 years,


It is illegal for an unlicensed and unappointed person to receive commissions from the sale, solicitation, or negotiation of insurance. However, renewal or deferred commissions are payable to retired producers.

Shared Commissions

A producer may share a commission with another producer when the other producer is licensed in the same line of business.

Deferred Commissions

Deferred commissions may be paid to a person who sold an insurance policy when the person was a licensed producer at the time of the sale.

Representing an Unauthorized Insurer

Producers are personally liable for the business they transact on behalf of insurers that are not licensed or unauthorized to do business in Michigan.

Fiduciary Responsibility

Producers have a fiduciary responsibility for all funds collected from clients. Producers must not mingle these funds with their own personal funds. However, producers are not required by law to open a separate bank account for such funds.

  •  A producer's fiduciary responsibility including the receipt and distribution of premiums due to an insurer

Records Maintenance

Producers and Insurers must keep full and accurate records of all insurance business in which they are involved. Records must be kept for at least Five Years.


Insurance companies are classified according to the location of its corporation. Regardless of where the Insurance company is incorporated, it still has to get a Certificate of Authority before transacting insurance within a state.

The Following definitions apply:

  • Domestic Insurance Company: A company that resides and is incorporated under the laws of the state in which its home office is located. A company chartered in Michigan would be a domestic company in Michigan.
  • Foreign Insurance Company: A company whose home office is located in another state. It is considered to be a foreign company in all states except for its home office. A company chartered in Texas would be a foreign company in Michigan.
  • Alien Insurance Company: A company that is charted and organized in any country other than the United States. It is considered an alien company in all states. A company chartered in Canada would be an alien company in Michigan.


Authorized Insurer: An insurance company that has qualified and received a Certificate of Authority from the Insurance Department to sell insurance in tis state. Also called an Admitted Insurance Company.

Unauthorized Insurer: An insurance company that has been denied or not yet applied for a Certificate of Authority and may sell insurance in this state.


Stock Insurance Company: An insurance company that is owned and controlled by stockholders. The stockholders provide the capital and share in profits or losses

  • Stock Insurance companies are considered "Nonparticipating" because the policyowners do not share in the profits of the company.
  • The objective is to produce profits for the owners, the stockholders.
  • Stock insurance companies that issue both participating and nonparticipating policies are referred to as a company doing business on a mixed plan.

Mutual Life Insurance Companies: An insurance company owned and controlled by its policyowners. These policyholders elect a board of trustees or Commissioners to manage the firm. The profits of a mutual insurance company are returned to the policyowners in the form of dividends or retained as surplus to to meet future obligations.

  • Mutual Insurance companies are considered participating because the policyowners do share in the profits of the company
  • The Objective is to provide insurance to its owners, the policyowners, at the lowest net cost.



It is an illegal practice to misrepresent any fact about an insurance policy, such as policy terms, benefits, value, costs¿, effective-date, or existence of a contract of insurance.

False Advertising

It is an illegal practice to falsely advertise insurance products to services in any way. This includes circulating statements, letters, or statements in newspaper magazines or other solicitation materials.

  • The identity of the insurer shall be made clear in all of its advertisements.


it is an illegal practice to make any public statement or advertisement that contains false or malicious information or unsubstantiated criticism about an insurance company.

Boycott, Coercion & Intimidation

It is an illegal practice to commit or coordinate any act or boycott, coercion, or intimidation in order to restrain or monopolize the business of insurance.


Intimidation is the unfair trade practice of using threat of force to restrict fair trade in the transaction of insurance.

False Financial Statements

It is illegal to publish any false financial statement regarding a person or entity.

Unfair Discrimination

It is an illegal practice to unfairly discriminate against a person in a way on an insurance-related matter. An example would be charging a different rate for someone in the same actuarial class. Fair discrimination is necessary for the insurance of life insurance policies, which are based on mortality. Also, no insurer or producer may cancel or refuse to underwrite or renew a particular insurance risk based on race, color, creed, sex, or blindness of an applicant or policyholder.


Twisting is the unfair trade practice of replacing an insurance policy from one insurance to another based on misrepresentation.

Insurance Fraud

It is illegal to commit an act of insurance fraud, which is defined as any intentional act occurring in the course of insurance business that attempts to deceive or misrepresent a material fact. Any person who, in the absence of fraud or bad faith, reports information regarding an act of insurance fraud will be given immunity. 

Illegal Inducements

It is illegal to promise employment, profits, stocks, or returns as an inducement to insurance.


It is illegal to offer a premium rebate, gift, or a special advantage of any kind to consumers as an inducement to purchase contract of insurance. The exception would be:

  • A producer quoting life insurance may give an applicant an article of merchandise having an invoice value of $5.00 or less.


The Commissioner may suspend or revoke its certificate of authority to an insurer found in violation of the Unfair Trade Practices law and impose a fine of at least $100 and no more than $125,000.


The following acts, omissions, or practices are defined as unfair and deceptive claim settlement practices when knowingly committed or performed with such frequency as to indicate a general business practice, and are prohibited:

  • Misrepresenting to insured's pertinent facts or policy provisions relating to cover at issue.
  • Failing to acknowledge and act reasonable promptly upon communications with respect to an insurance claim
  • Failing to adopt and implement reasonable standards for prompt investigation and processing of insured's claims
  • Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insured's
  • Not attempting in good faith to effect prompt, fair and equitable settlement of claims on which liability has become reasonable clear; Refusing or delaying a settlement solely because there is other insurance available to partially or entirely stratify the claim of loss; the claimant who has a right to recover from more than one insurer has the right to choose the coverage from which to recover and the order in which payments are to be made.
  • Compelling insured's to initiate suits to recover amounts due under an insurance policy by offering substantially less than the amount ultimately recovered in those suits.
  • Failing to provide a reasonable basis for the denial of a claim upon request


The Fair Credit Reporting Act (FCRA) is a federal law that regulates the use and disclosure of consumer credit information. The primary purpose of the Fair Credit and Reporting Act is to protect consumers with guidelines regarding credit reporting and distribution. Credit reporting agencies, such as Experian, Equifax, and TransUnion, are regulated by the FCRA. They are required by law to provide information about a consumer stored in the agency's files. Adverse information that has been removed from a consumer's file cannot be reinstated without notifying the customer with five days, Furthermore, agencies cannot store adverse information about a consumer for longer than set period of time. For example, information about late payments and final judgments can only stay on a credit report for up to seven years, bankruptcies - 10 years, and tax liens - seven years from the date paid.

Insurance companies are also subject to the FCRA because they use consumer credit reports during underwriting and risk selection. Insurers must notify consumers when an adverse underwriting decision has been made based on a credit report, and include the name of the credit reporting agency they used as the basis for the decision.


The Fraud and False Statements federal law makes it illegal to lie, falsify, or conceal information (orally or in writing) from a federal official. As it applies to insurance, any person engaged in interstate insurance business who engages in international unfair or deceptive insurance practices or overvalues an insurance product in a financial report or document presented to a regulatory official, will be in violation of federal law. Other violations include, but are not limited to: embezzling money from an insurance company, misappropriating insurance premiums, and writing threatening letters to insurance offices.

  • The punishment for violation is a fine up to %50,000, imprisonment up to 15 years, and / or license revocation. 
  • An individual convicted of a felony involving dishonesty may engage in the business of insurance ONLY after receiving written consent from the state insurance regulatory agency and a 1033 waiver.


A fraudulent Insurance Act includes, but is not limited to, acts or omissions committed by any person who knowingly, and with an intent to injure, defraud, or deceive.

Financial Loss

"Financial Loss" includes, but is not limited to, loss of earnings, out-of-pocket and other expenses, repair and replacement costs, investigative costs and claims payments


Any document or evidence in the Commissioner´s possession and used in conjunction with an insurance fraud investigation are confidential. Other documents, evidence, etc. that do not relate to such investigation are public records.

Consumer privacy regulations permit the release of an insured's financial information when an authorized agency makes a request to the insurer duding an insurance fraud investigation.

Producers and insurers must provide applicants and policyowners with a notice of its information practices at the time of policy application, delivery, renewal, and when personal information is collected. Producers and insurers must receive a signed disclosure authorization form from applicants and policyowners before such private or personal information can be used.

Before initiating an investigative consumer report producers and insurers must notify applicants and policyowners they may be interviewed for the report, and that they may receive a copy of the report.

A producer or insurer cannot disclose a consumer's policy number to nonaffiliated third parties. The exceptions to this include:

  • Member in an affinity program that was identified to the consumer entering the program
  • Consumer Reporting Agency
  • Service provider marketing on behalf if the insurer

Producers and insurers must provide applicants with a written statement concerning an adverse underwriting decision. Producers and insurers cannot ask applicants for information pertaining to a prior adverse underwriting decision, unless the inquiry also requests the reasons for the adverse decision.


Solicitation & Sales Presentations

Producers must provide applications and prospects with the approved NAIC Buyer's Guide. Producers must also provide a Policy Summary to applicants.

Policy Summary

The policy summary contains specific information on the provisions, benefits and coverage of the policy applied for.

Buyer's Guide

The buyer's guide enables applicants to compare different life insurance policies and help them choose which policy is best for their needs. A life insurance guide normally includes information such as:

  • Deciding on how much life insurance to buy
  • Comparing life insurance policy rates
  • Comparing life insurance policy requirements


An illustration is a presentation, graph, or chart that includes non-guaranteed elements of a policy of life insurance over a period of years. Non-guaranteed elements are the premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.

Illustrations must be clearly labeled as such, and contain the following: name and address of the issuing insurer; name, age and sex of the proposed insured; generic name of the policy; Initial death benefit; and any non-guaranteed elements such as dividend options.

Words, phrases or illustrations may not be used in a manner that misleads or deceives.

If an illustration is sued, a copy of it must be submitted with the application for insurance, and a copy must be provided to the applicant.


In order to save on premiums, a Life Insurance policy can legally be backdated up to 6 months.


In the interest of protecting the assets of a minor, state-law requires that guardian be appointed to administer the proceeds payable to the minor child.


Notice of Replacement: under Michigan law the replacement of life insurance contracts with a new contract requires the producer to give the applicant a written comparison and summary statement at the request of the policyholder and to follow instructions regarding replacement as obtained from the appointing insurer. Replacement: means any transaction in which new life insurance or a new annuity is purchased and, as a result, the existing life insurance or annuities will be any of the following:

  • Lapsed, forfeited, surrendered, or otherwise terminated
  • Reissued with any reduction in cash value. Converted to reduced paid-up insurance, continued as extended term insurance or otherwise reduced in value by the use of nonforfeiture benefits or policy values
  • Amended so as to affect either a reduction in benefits or in the term for which coverage would otherwise remain in force or for which benefits would be paid.
  • Reissued with a reduction in cash value
  • Used in a financed purchase

Duties Of The Producer

Present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer. A copy must be left with the applicant. Obtain a list of all existing life insurance and/or annuity policies to be replaced including policy members and the names of all companies being replaced. Leave the applicant with the original or a copy of the written or printed communications used for presentation to the applicant. Submit to the replacing insurance company a copy of the Replacement Notice with the application.

Duties of the replacing insurance company

Require from the producer a list of the applicant's life insurance or annuity contracts to be replaced and a copy of the replacement notice provided to the applicant.

Send each existing insurance company a written communication advising of the proposed replacement within a specified period of time of the date that the application is received in the replacing insurance company's home or regional office. A policy summary or ledger statement containing policy data on the proposed life insurance or annuity must be included.

The replacing insurer must allow the owner of the life insurance policy to return the policy within 30 days after delivery for a full refund.


Right to Examine (Free-Look)

Life insurance policies must provide a minimum free-look period of 10 days upon policy delivery. This allows the policyowner time to decide whether or not to keep it. If the policyowner decides not to keep the policy within the 10 days allowed, a full refund will be given.

Legal Action

In Michigan, legal action can be taken up to 6 years against an insurer for failure to pay life insurance claims after proof of loss was submitted.

Grace Period (free-look)

The required grace period for life insurance policies in Michigan is 1 month. The grace period is a time which a policy remains in force after the premium is due, but not paid. If insured dies during the grace period, the death proceeds will still be paid, minus the premium due.


A lapsed policy may be reinstated within 3 years from the due-date upon evidence of insurability and all back premiums are paid with interest.

Important Notes

  • The acceptance of a Credit Life application requires the submission of a certificate of insurance to the insured within 30 days.
  • In determining whether a pre-existing condition applies, the enrollee CANNOT have more than 63 days gap in health insurance.
  • A life insurance policy sold in Michigan may be contested by the insurer ONLY during the first 2 years of the contract.
  • In Michigan, legal action can be taken up to 3 years against an insurer for failure to pay health insurance claims after proof of loss was submitted.
  • In Michigan, legal action can be taken up to 6 years against an insurer for failure to pay life insurance claims after proof of loss was submitted.
  • The Insurer must notify the producer in the event of the producer's insurance appointment being terminated.
  • A Commissioner may only revoke or suspend a producer's license after a hearing that concludes a violation has occurred.
  • Life insurance applications may be backdated to reduce the premium cost, "Save on Premiums". A life insurance policy can legally be backdated up to 6 months.
  • Providing Incorrect, misleading, incomplete, or materially untrue information in a license application is considered an act of misrepresentation.
  • An insurer would be committing Unfair Discrimination if coverage was denied based upon Martial Status.
  • Licenses may be reinstated by completing the requirement within 90 days of the renewal date.
  • A producer who knowingly submits a false statement in support of a claim may be found guilty of fraud.
  • When an accident and health policy requires payment of an additional premium to provide for a newborn, the first payment is due within 31 days after the date of birth.
  • Producers must submit the replacing insurer a list of all life insurance policies or annuity contracts proposed to be replaced.
  • Coinsurance is an indemnity plan limitation that will pay dental bills after a small amount is paid first by the insured.
  • A producer's fiduciary duty requires that premiums are forwarded to the insurer on a timely basis. Producers must turn over monies held in a fiduciary capacity to the insurer in a timely manner.
  • Newborn coverage under health insurance policies MUST include coverage for "Birth Abnormalities".
  • Underwriting insurance does not require an insurance license.
  • Preventive and diagnostic services are normally fully paid in most dental plans. Deductibles typically do NOT apply.
  • Employers contributions must be held under the terms of the Taft-Harley Act [Trust]
  • Under Long-Term care insurance, an insurer MUST offer to each policyowner an Inflation Protection Feature at the time of purchase.

* 1935 Social Security Act : Created to provide for United States citizens general welfare who are 65 years of age and older. The Act was enacted by the Senate & House of Representatives of the United States to enable individual states to make more adequate provisions for furnishing financial assistance to the aged, blind, dependent and crippled children, maternal and child welfare, publish health and to establish more adequate provisions for the administration of their unemployment compensation laws,

* 1868 Paul v. Virginia : This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state.

* 1944 U. States v. SEUA : In the Southeastern Underwriters Association case, the Supreme Court ruled that the insurance industry is subject to a series of Federal Laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.

* 1945 McCarran-Ferguson Act : This law made it clear that the states continued regulation of insurance was in the publics best interest. However, it also made possible the application of federal antitrust laws to the extent that [The insurance business] is not regulated by state law.

* 1958 Intervention by the FTC : In 1958 the Supreme Court held that the McCarran Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further Federal Control, but none have been successful.

* 1959 Intervention by the SEC : The Supreme Court ruled that Federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulations. The SEC regulated variable life insurance.

* 1868 Paul v. Virginia : This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state.

* 1970 Fair Credit Reporting Act : Requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about Any Investigations that are being made upon completion of the application.

* 1994 U. States Code (USC) Section 1033 & 1034.
According to 18 U.S.C. 1033 & 1034 : It is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a "Letter of Written Consent to Engage in the Business of Insurance" from the regulating insurance department of the individual's state of resistance.

* 1999 Financial Services Modernization Act. :  In 1999 Congress passed the Financial Services Modernization Act, which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages and insurance companies can now enter each other's lines of business.

* 2001 Uniting & Strengthening America by Providing Appropriate Tools Required to Intercept & Obstruct Terrorism Act. : The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the September 11, 2001, terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities.

* 2003 Do Not Call Implementation Act. : The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls.

* 2010 Patient Protection & Affordable Care Act (PPACA) : Often shortened to the Affordable Care Act (ACA), it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in U.S. history.

Personal Notes From: Michigan Pre-licensing Education - Life, Accident and Health Insurance course has been approved by the Michigan Department of Financial Services as meeting the mandatory 20-hour requirement for Life and 20-hour Requirement for Health | XCEL Solutions LLC. Provider ID#: 0950 Course ID#: 60731/60732

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