Texas Pays 18 Percent for a Late Claim, Michigan 12, and One of Them Is Nearly Automatic
The short version. Two states put a number on a slow claim payment. Texas's is bigger and harder to get. Michigan's is smaller and, if you are the insured rather than someone claiming against another driver's policy, the statute says the interest simply attaches to the benefits and is paid with them. The headline rates are the least useful part of either law. What matters is who can collect and what has to happen first.
Texas: 18 percent, first-party only, in court
Texas Insurance Code chapter 542, subchapter B, sets a chain of deadlines and then attaches a penalty to missing them.
| The insurer must | Within | Section |
|---|---|---|
| Acknowledge the claim, begin investigating, and request everything it reasonably believes it will need | 15 days (30 business days for an eligible surplus lines insurer) | 542.055(a) |
| Notify you in writing that the claim is accepted or rejected, running from receipt of everything required to secure final proof of loss | 15 business days | 542.056(a) |
| The same notice, where it has a reasonable basis to believe the loss was arson | 30 days | 542.056(b) |
| If it cannot decide in time: say why within the original period, then decide | 45 days from that notice | 542.056(d) |
| Pay, once it has told you it will | 5 business days | 542.057(a) |
| The outer limit, after which damages attach | 60 days | 542.058(a) |
Miss those and section 542.060(a) says the insurer is liable, on top of the claim itself, for:
interest on the amount of the claim at the rate of 18 percent a year as damages, together with reasonable and necessary attorney's fees
Three gates sit on that sentence and each one closes it for a lot of people.
It is first-party only. Section 542.051(2) defines "claim" for the whole subchapter as a first-party claim, made by an insured, policyholder or named beneficiary, and payable directly to them. If the car that hit you belongs to someone else and you are claiming against their insurer, you are not making a claim within the meaning of this subchapter at all. The 18 percent is not smaller for you. It is absent.
It is a litigation remedy. The interest is "as damages", and 542.060(b) says the attorney's fees are "taxed as part of the costs in the case". There is no version of this you invoke by letter. Writing to an adjuster that you are now owed 18 percent describes a remedy that only exists once someone has gone to court and won.
A catastrophe extends every deadline. Section 542.059(b) adds 15 days to every deadline in the subchapter during a weather-related catastrophe or major natural disaster as defined by the commissioner. The clock you are counting against may not be the clock that applies.
The 2017 change that did not touch cars
Texas cut this penalty in 2017, and the coverage of it is where auto owners get misled.
Section 542.060(c), added that year, says that in an action to which chapter 542A applies the rate is not 18 percent. It is simple interest at the Finance Code section 304.003 rate plus five percent, fixed on the date of judgment.
But chapter 542A defines what it covers, and the definition is narrow. Section 542A.001(2) says a claim under that chapter is a first-party claim made by an insured "under an insurance policy providing coverage for real property or improvements to real property", arising from damage caused wholly or partly by forces of nature.
A personal auto policy does not provide coverage for real property. On the face of that definition, an auto claim is outside chapter 542A, which leaves 542.060(a) and its 18 percent as the rate that applies to it. That includes a hail claim on a car, even though hail is exactly the peril the 2017 change was written around.
We have not found a case testing that boundary and we are not going to assert one. What we can say is what the two definitions say, which is why both are quoted above rather than summarised.
Michigan: 12 percent, and for an insured it rides along with the payment
Michigan does it differently. MCL 500.2006(1) says an insurer must pay on a timely basis to its insured, to a person directly entitled to benefits under the insured's contract, or to a third party tort claimant, or else pay 12 percent interest under subsection (4).
MCL 500.2006(4) then splits into two limbs that could hardly be further apart.
If you are the insured, or directly entitled to benefits, MCL 500.2006(4) says that from 60 days after satisfactory proof of loss:
the benefits paid bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum
No bad faith. No court. The statute says the interest attaches to the benefits and, later in the same subsection, that it is paid in addition to and at the time of payment of the loss.
If you are a third party tort claimant, the same subsection gives you 12 percent only if all three of these are true: the insurer's liability for the claim is not reasonably in dispute, the insurer refused payment in bad faith, and the bad faith was determined by a court of law.
So the two states shut out the same person in opposite ways. Texas excludes third-party claimants by definition. Michigan lets them in and then puts a courtroom in the doorway.
Two Michigan details worth having
The 30-day letter that starts everything. MCL 500.2006(3) requires the insurer to specify in writing what materials constitute a satisfactory proof of loss, no later than 30 days after receiving a claim, unless it settles within those 30 days. That letter is what defines "satisfactory proof of loss", and the 60-day interest clock in subsection (4) runs from when that proof was received. If nobody ever told you what proof was wanted, that is worth asking about in writing.
A PIP claim runs on a different section. MCL 500.2006(6) says that where this section is specifically inconsistent with chapter 31, the no-fault chapter, it does not apply. Personal protection benefits run on MCL 500.3142 instead. Under MCL 500.3142(2) they are overdue if not paid within 30 days after the insurer receives reasonable proof of the fact and the amount of the loss, and MCL 500.3142(4) says an overdue payment bears simple interest at 12 percent per annum. Same rate, shorter fuse, different section.
What we are not saying
We are not telling you to demand 18 percent in a letter. In Texas it is damages in a lawsuit with the fees taxed as costs. Naming it in correspondence tells an adjuster you have read a statute, not that you are owed money today.
We are not resolving the Michigan qualifier. Subsection (1) makes late payment an unfair trade practice "unless the claim is reasonably in dispute", while the first sentence of subsection (4) states a flat first-party entitlement with no such condition. How Michigan courts have reconciled those two is a case-law question. We read the statute, not the case law, and this page stops where the statute stops.
We are not saying your claim is late. Both states run their clocks from a defined event, and in both the defining document is the insurer's own: in Texas, receipt of everything required to secure final proof of loss; in Michigan, receipt of satisfactory proof of loss as the insurer specified it. Whether your file crossed that line is a fact about your file.
We are not describing any other state. Two states are read here. Most states have something in this family and the terms differ enormously. When we compare them it will be a table with every jurisdiction named and cited.
If you think a payment is late
Find the date the clock starts, not the date you filed. Neither statute counts from the accident or from the day you called. Texas counts from receipt of everything the insurer required for final proof of loss. Michigan counts from receipt of satisfactory proof of loss, which the insurer was supposed to define for you in writing within 30 days.
Ask for that definition in writing if you never got it. In Michigan it is a statutory duty. In Texas the equivalent is the section 542.055(a) request for all items the insurer reasonably believes it will need, made within 15 days.
Keep the acceptance or rejection notice. In Texas it must be in writing, and if the claim is rejected section 542.056(c) requires the notice to state the reasons. That document is the pivot for the five-business-day payment deadline that follows.
Know which lane you are in. First-party, meaning a claim on your own policy, is the lane both statutes are built for. If you are claiming against another driver's insurer, Texas's subchapter does not reach you at all and Michigan's requires a court to find bad faith first.
Sources
- Texas Insurance Code chapter 542, subchapter B (sections 542.051, 542.055, 542.056, 542.057, 542.058, 542.059, 542.060) and chapter 542A (section 542A.001), read in full on 18 August 2026 from the Texas Legislature's own statutes site, current through the 89th 2nd Called Legislative Session, 2025. Section 542.060(c) was added by Acts 2017, 85th Legislature.
- MCL 500.2006 and MCL 500.3142, read in full on 18 August 2026 from the Michigan Legislature's own site.
- Where to file an insurance complaint in every state
- 120 days for your car, one year for your house
- When insurance will not pay for a proper repair
- How insurance claims work
General consumer information: not legal, insurance, or financial advice. Requirements, coverage, and practices vary by state, policy, and manufacturer.