MI Property & Casualty common mistakes
MI Property & Casualty · Understand the traps and how to avoid them.
On a Homeowners question the candidate sees 'HO-3' or 'HO-5' and immediately treats every coverage in the policy - dwelling, other structures, personal property and liability - as written on an open-peril (all-risk) basis, so they pick the open-peril answer for a contents loss.
Coaching shorthand ('the special form is the all-risk form') collapses the form-by-form peril matrix, and HO-3 really is open peril on the building but only broad named peril on personal property.
What to do instead
Before exam day, reproduce a grid from memory: forms HO-2, HO-3, HO-5, HO-6 and HO-8 down the side; dwelling, other structures and personal property across the top; write 'named', 'broad' or 'open' in each cell. Drill until 'HO-3 contents = broad named peril' is automatic.
Given a property loss question with a policy limit, an insurance-to-value figure and a loss amount, the candidate subtracts the deductible from the loss and stops, never computing the coinsurance ratio.
Coinsurance feels like a health-insurance idea, and the loss-minus-deductible shortcut is correct on every non-coinsurance question, so it gets over-learned and applied everywhere.
What to do instead
Force a four-step sequence on every property loss: (1) required amount = coinsurance percentage x value at risk; (2) did the limit meet it? (3) if not, recovery = limit / required x loss; (4) then apply the deductible. Separately memorise which policies have no coinsurance clause - homeowners forms and the unendorsed dwelling forms - so you never apply the penalty where it does not belong.
The candidate swaps PAP Part A (liability), Part B (medical payments), Part C (uninsured/underinsured motorists) and Part D (collision/other than collision), and answers a Michigan injury question with MedPay or Part A when the injured person is the named insured in their own auto.
All four parts pay 'for injuries or damage involving a car', and Michigan's no-fault overlay - PIP paying the insured's own medical and wage loss first regardless of fault, with tort liability sharply restricted - is not a separate lettered part, so it never appears where candidates look for it.
What to do instead
Before reading the options, write two words on the scratch paper: WHOSE BODY / WHOSE CAR. Then apply Michigan's order of payment: PIP first for the insured's own injury, liability only for harm the insured causes to others, and tort recovery against the at-fault driver limited by the serious-impairment threshold and the mini-tort cap for vehicle damage.
The candidate eliminates the 'workers' compensation pays' answer because the injured employee was negligent, was on a break, was in the parking lot, or because the employer did nothing wrong.
Negligence analysis from the casualty chapters bleeds into comp; candidates apply a fault model to a no-fault, exclusive-remedy system.
What to do instead
Run the statutory test on every comp question: did the injury arise out of and in the course of employment? Remember comp is the employee's exclusive remedy against the employer, and that Part Two (employers liability) only picks up suits that fall outside the comp system. Learn the going-and-coming rule and its recognised exceptions for special errands and premises injuries.
The candidate selects a Businessowners Policy for an ineligible risk (tavern or bar, auto repair shop or dealership, bank, larger manufacturer), or assumes business income begins on the first day of a covered shutdown.
The BOP is remembered as 'the small business policy', so candidates assume any small business qualifies; the waiting period lives inside the form rather than in the headline features.
What to do instead
Memorise two lists before answering BOP questions: the eligibility screen (building and contents limits, and eligible classes such as retail, service, office, apartment and wholesale versus excluded classes) and the BOP business income provision, which is subject to a 72-hour waiting period. Check size and class before you check coverage.
The candidate treats a Commercial Package Policy as one policy that automatically includes property, general liability, auto and crime, and answers liability trigger questions as though every commercial liability coverage were occurrence-based.
The CPP is a shell built from a common declarations and conditions section plus separately selected coverage parts, and the exam tests exactly that assembly knowledge rather than the label.
What to do instead
State the architecture out loud: CPP = common policy declarations and conditions + individually selected coverage parts + a chosen causes-of-loss form for the property part. Then fix the trigger: the CGL is occurrence-based (injury or damage occurring during the policy period), while claims-made responds to the date the claim is made and turns on the retroactive date and any extended reporting provision.
The candidate assumes a dwelling policy automatically includes personal liability and medical payments to others, or that theft is covered under the basic dwelling form, and picks a DP form by its number rather than by what it actually covers.
Homeowners is studied first and does bundle property with liability, so the dwelling policy's property-only design is counter-intuitive, and the DP-1, DP-2 and DP-3 differ in perils, not just in numbering.
What to do instead
Memorise that dwelling forms provide property coverages only - dwelling, other structures, personal property, fair rental value and the additional coverages - with liability and medical payments added only by endorsement, and that theft protection appears as the forms broaden. Learn the perils ladder: DP-1 basic/named perils, DP-2 broad, DP-3 open peril on the dwelling.
The candidate cannot place Michigan's shared-market and residual-market mechanisms and instead invents a federal programme or assumes the voluntary market will write the risk.
The Michigan-specific entities are taught late and lightly but reliably appear as a question or two, and they are easy to blur because several of them have similar-sounding names.
What to do instead
Build a one-page 'who covers the uncoverable' sheet: the Michigan Basic Property Insurance Association as the state property plan of last resort, the Michigan Automobile Insurance Placement Facility administering the assigned claims plan, the workers' compensation placement facility, and the Michigan Catastrophic Claims Association's role in reimbursing PIP claims above the statutory threshold. Verify names and current figures on the Michigan DIFS site before exam day.
On ethics and licensing items the candidate chooses the 'client-friendly' answer - rebating part of a commission, splitting commission with an unlicensed friend, or advancing premium to close a sale - because it appears to help the insured.
Unfair trade practice rules are counter-intuitive: conduct that benefits a customer can still be a prohibited inducement, and candidates reason from customer service rather than from the statute.
What to do instead
Attach a one-line example to each named practice: rebating, twisting, misrepresentation, false advertising, illegal inducement, commingling or misappropriation of premium, and sharing commissions with an unlicensed person. Remember the producer holds premium in a fiduciary capacity and that Michigan insurance is regulated at state level by DIFS, with the McCarran-Ferguson Act preserving state authority.
When asked who is entitled to the loss payment or whether a loss is covered, the candidate answers from the named insured shown on the declarations page rather than applying insurable interest at the time of loss, indemnity, and the valuation method the form actually uses.
Declarations-page thinking is concrete and memorable, while insurable interest, indemnity, subrogation and actual cash value are memorised as vocabulary definitions and never used as analytical tools.
What to do instead
For every valuation or payment question, name the settlement method in the form first: actual cash value (replacement cost less depreciation) unless replacement cost is stated, then the form's special limits and loss-settlement provisions. Write one line each for insurable interest timing (property: at time of loss), the indemnity ceiling, and subrogation, then apply them to a three-sentence scenario.