<PAGE>
                                                                    EXHIBIT 10.6


                               GUARANTEE AGREEMENT

                        AMERICAN PHYSICIANS CAPITAL, INC.

                            Dated as of May 22, 2003



<PAGE>

                                TABLE OF CONTENTS

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                                                ARTICLE I

                                      DEFINITIONS AND INTERPRETATION

SECTION 1.1          Definitions and Interpretation...............................................................1

                                                ARTICLE II

                            POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 2.1          Powers and Duties of the Guarantee Trustee...................................................4
SECTION 2.2          Certain Rights of the Guarantee Trustee......................................................5
SECTION 2.3          Not Responsible for Recitals or Issuance of Guarantee........................................7
SECTION 2.4          Events of Default; Waiver....................................................................7
SECTION 2.5          Events of Default; Notice....................................................................8

                                               ARTICLE III

                                          THE GUARANTEE TRUSTEE

SECTION 3.1          The Guarantee Trustee; Eligibility...........................................................8
SECTION 3.2          Appointment, Removal and Resignation of the Guarantee Trustee................................9

                                                ARTICLE IV

                                                GUARANTEE

SECTION 4.1          Guarantee....................................................................................9
SECTION 4.2          Waiver of Notice and Demand.................................................................10
SECTION 4.3          Obligations Not Affected....................................................................10
SECTION 4.4          Rights of Holders...........................................................................11
SECTION 4.5          Guarantee of Payment........................................................................11
SECTION 4.6          Subrogation.................................................................................11
SECTION 4.7          Independent Obligations.....................................................................12
SECTION 4.8          Enforcement.................................................................................12

                                                ARTICLE V

                                LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1          Limitation of Transactions..................................................................12
SECTION 5.2          Ranking.....................................................................................13

</TABLE>



                                       i
<PAGE>


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                                                ARTICLE VI

                                               TERMINATION

SECTION 6.1          Termination.................................................................................13

                                               ARTICLE VII

                                             INDEMNIFICATION

SECTION 7.1          Exculpation.................................................................................13
SECTION 7.2          Indemnification.............................................................................14
SECTION 7.3          Compensation; Reimbursement of Expenses.....................................................15

                                               ARTICLE VIII

                                              MISCELLANEOUS

SECTION 8.1          Successors and Assigns......................................................................15
SECTION 8.2          Amendments..................................................................................16
SECTION 8.3          Notices.....................................................................................16
SECTION 8.4          Benefit.....................................................................................17
SECTION 8.5          Governing Law...............................................................................17
SECTION 8.6          Counterparts................................................................................17

</TABLE>



                                       ii

<PAGE>

                               GUARANTEE AGREEMENT

                  This GUARANTEE AGREEMENT (the "Guarantee"), dated as of May
22, 2003, is executed and delivered by American Physicians Capital, Inc., an
insurance holding company incorporated in Michigan (the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"Guarantee Trustee"), for the benefit of the Holders (as defined herein) from
time to time of the Capital Securities (as defined herein) of APCapital Trust
II, a Delaware statutory trust (the "Issuer").

                  WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of May 22, 2003,among the trustees named
therein of the Issuer, American Physicians Capital, Inc., as sponsor, and the
Holders from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing on the date hereof securities, having an aggregate
liquidation amount of $15,000,000, designated in the Declaration as InCapSSM
(the "Capital Securities"); and

                  WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.

                  NOW, THEREFORE, in consideration of the purchase by each
Holder of the Capital Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
for the benefit of the Holders.

                                    ARTICLE I

                         DEFINITIONS AND INTERPRETATION

                  SECTION 1.1 Definitions and Interpretation.

                  In this Guarantee, unless the context otherwise requires:

                  (a) capitalized terms used in this Guarantee but not defined
in the preamble above have the respective meanings assigned to them in this
Section 1.1;

                  (b) a term defined anywhere in this Guarantee has the same
meaning throughout;

                  (c) all references to "the Guarantee" or "this Guarantee" are
to this Guarantee as modified, supplemented or amended from time to time;

                  (d) all references in this Guarantee to Articles and Sections
are to Articles and Sections of this Guarantee, unless otherwise specified;

                  (e) terms defined in the Declaration as of the date of
execution of this Guarantee have the same meanings when used in this Guarantee,
unless otherwise defined in this Guarantee or unless the context otherwise
requires; and



<PAGE>

                  (f) a reference to the singular includes the plural and vice
versa.

                  "Beneficiaries" means any Person to whom the Issuer is or
hereafter becomes indebted or liable.

                  "Common Securities" has the meaning specified in the
Declaration.

                  "Corporate Trust Office" means the office of the Guarantee
Trustee at which at any particular time its corporate trust business shall be
principally administered, which at all times shall be located within the United
States and at the time of the execution of this Guarantee shall be Rodney Square
North, 1100 North Market Street, Wilmington, DE 19890-0001.

                  "Covered Person" means any Holder of Capital Securities.

                  "Debenture Issuer" means American Physicians Capital, Inc. or
any successor entity resulting from any consolidation, amalgamation, merger or
other business combination, in its capacity as issuer of the Debentures.

                  "Debentures" means the junior subordinated debentures of the
Debenture Issuer that are designated in the Indenture as the "Floating Rate
Junior Subordinated Debt Securities due 2033" and held by the Institutional
Trustee (as defined in the Declaration) of the Issuer.

                  "Event of Default" has the meaning set forth in Section 2.4.

                  "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) which are required to be paid on
such Capital Securities to the extent the Issuer has funds available in the
Property Account (as defined in the Declaration) therefor at such time, (ii) the
price payable upon the redemption of any Capital Securities to the extent the
Issuer has funds available in the Property Account therefor at such time, with
respect to any Capital Securities that are (1) called for redemption by the
Issuer or (2) mandatorily redeemed by the Issuer, in each case, in accordance
with the terms of such Capital Securities, and (iii) upon a voluntary or
involuntary liquidation, dissolution, winding-up or termination of the Issuer
(other than in connection with the distribution of Debentures to the Holders of
the Capital Securities in exchange therefor as provided in the Declaration), the
lesser of (a) the aggregate of the liquidation amount of the Capital Securities
and all accrued and unpaid Distributions on the Capital Securities to the date
of payment, to the extent the Issuer has funds available in the Property Account
therefor at such time, and (b) the amount of assets of the Issuer remaining
available for distribution to Holders in liquidation of the Issuer after
satisfaction of liabilities to creditors of the Issuer as required by applicable
law (in either case, the "Liquidation Distribution").

                  "Guarantee Trustee" means Wilmington Trust Company, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.

                  "Holder" means any Person in whose name any Capital Securities
are registered on the books and records of the Issuer; provided, however, that,
in determining whether the



                                       2
<PAGE>

holders of the requisite percentage of Capital Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.

                  "Indemnified Person" means the Guarantee Trustee (including in
its individual capacity), any Affiliate of the Guarantee Trustee, or any
officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Guarantee Trustee.

                  "Indenture" means the Indenture, dated as of May 22, 2003,
between the Debenture Issuer and Wilmington Trust Company, not in its individual
capacity but solely as trustee, and any indenture supplemental thereto pursuant
to which the Debentures are to be issued to the Institutional Trustee of the
Issuer.

                  "Liquidation Distribution" has the meaning set forth in the
definition of "Guarantee Payments" herein.

                  "Majority in liquidation amount of the Capital Securities"
means Holder(s) of outstanding Capital Securities, voting together as a class,
but separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the amount that would be paid upon the
redemption, liquidation or otherwise on the date upon which the voting
percentages are determined, plus unpaid Distributions accrued thereon to such
date) of all Capital Securities then outstanding.

                  "Obligations" means any costs, expenses or liabilities (but
not including liabilities related to taxes) of the Issuer, other than
obligations of the Issuer to pay to holders of any Trust Securities the amounts
due such holders pursuant to the terms of the Trust Securities.

                  "Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:

                  (a) a statement that such officer signing the Officer's
Certificate has read the covenant or condition and the definitions relating
thereto;

                  (b) a brief statement of the nature and scope of the
examination or investigation undertaken by such officer in rendering the
Officer's Certificate;

                  (c) a statement that such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

                  (d) a statement as to whether, in the opinion of such officer,
such condition or covenant has been complied with.

                  "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust,


                                       3
<PAGE>

unincorporated association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.

                  "Responsible Officer" means, with respect to the Guarantee
Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee
with direct responsibility for the administration of any matters relating to
this Guarantee, including any vice president, any assistant vice president, any
secretary, any assistant secretary, the treasurer, any assistant treasurer, any
trust officer or other officer of the Corporate Trust Office of the Guarantee
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.

                  "Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
3.1.

                  "Trust Securities" means the Common Securities and the Capital
Securities.

                                   ARTICLE II

               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

                  SECTION 2.1 Powers and Duties of the Guarantee Trustee.

                  (a) This Guarantee shall be held by the Guarantee Trustee for
the benefit of the Holders of the Capital Securities, and the Guarantee Trustee
shall not transfer this Guarantee to any Person except a Holder of Capital
Securities exercising his or her rights pursuant to Section 4.4 (b) or to a
Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of
its appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee, and such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.

                  (b) If an Event of Default actually known to a Responsible
Officer of the Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders of the
Capital Securities.

                  (c) The Guarantee Trustee, before the occurrence of any Event
of Default and after the curing or waiving of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee, and no implied covenants shall be read into this
Guarantee against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.4(b)) and is
actually known to a Responsible Officer of the Guarantee Trustee, the Guarantee
Trustee shall exercise such of the rights and powers vested in it by this
Guarantee, and use the same degree of care and skill in its exercise thereof, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.


                                       4
<PAGE>

                  (d) No provision of this Guarantee shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act, or its own willful misconduct or bad faith, except
that:

                           (i) prior to the occurrence of any Event of Default
         and after the curing or waiving of all Events of Default that may have
         occurred:

                                    (A) the duties and obligations of the
                           Guarantee Trustee shall be determined solely by the
                           express provisions of this Guarantee, and the
                           Guarantee Trustee shall not be liable except for the
                           performance of such duties and obligations as are
                           specifically set forth in this Guarantee, and no
                           implied covenants or obligations shall be read into
                           this Guarantee against the Guarantee Trustee; and

                                    (B) in the absence of bad faith on the part
                           of the Guarantee Trustee, the Guarantee Trustee may
                           conclusively rely, as to the truth of the statements
                           and the correctness of the opinions expressed
                           therein, upon any certificates or opinions furnished
                           to the Guarantee Trustee and conforming to the
                           requirements of this Guarantee; but in the case of
                           any such certificates or opinions furnished to the
                           Guarantee Trustee, the Guarantee Trustee shall be
                           under a duty to examine the same to determine whether
                           or not on their face they conform to the requirements
                           of this Guarantee;

                           (ii) the Guarantee Trustee shall not be liable for
         any error of judgment made in good faith by a Responsible Officer of
         the Guarantee Trustee, unless it shall be proved that such Responsible
         Officer of the Guarantee Trustee or the Guarantee Trustee was negligent
         in ascertaining the pertinent facts upon which such judgment was made;

                           (iii) the Guarantee Trustee shall not be liable with
         respect to any action taken or omitted to be taken by it in good faith
         in accordance with the written direction of the Holders of a Majority
         in liquidation amount of the Capital Securities relating to the time,
         method and place of conducting any proceeding for any remedy available
         to the Guarantee Trustee, or exercising any trust or power conferred
         upon the Guarantee Trustee under this Guarantee; and

                           (iv) no provision of this Guarantee shall require the
         Guarantee Trustee to expend or risk its own funds or otherwise incur
         personal financial liability in the performance of any of its duties or
         in the exercise of any of its rights or powers, if the Guarantee
         Trustee shall have reasonable grounds for believing that the repayment
         of such funds is not reasonably assured to it under the terms of this
         Guarantee, or security and indemnity, reasonably satisfactory to the
         Guarantee Trustee, against such risk or liability is not reasonably
         assured to it.

                  SECTION 2.2 Certain Rights of the Guarantee Trustee.

                  (a) Subject to the provisions of Section 2.1:


                                       5
<PAGE>

                           (i) The Guarantee Trustee may conclusively rely, and
         shall be fully protected in acting or refraining from acting upon, any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document believed by
         it to be genuine and to have been signed, sent or presented by the
         proper party or parties.

                           (ii) Any direction or act of the Guarantor
         contemplated by this Guarantee shall be sufficiently evidenced by an
         Officer's Certificate.

                           (iii) Whenever, in the administration of this
         Guarantee, the Guarantee Trustee shall deem it desirable that a matter
         be proved or established before taking, suffering or omitting any
         action hereunder, the Guarantee Trustee (unless other evidence is
         herein specifically prescribed) may, in the absence of bad faith on its
         part, request and conclusively rely upon an Officer's Certificate of
         the Guarantor which, upon receipt of such request, shall be promptly
         delivered by the Guarantor.

                           (iv) The Guarantee Trustee shall have no duty to see
         to any recording, filing or registration of any instrument or other
         writing (or any rerecording, refiling or reregistration thereof).

                           (v) The Guarantee Trustee may consult with counsel of
         its selection, and the advice or opinion of such counsel with respect
         to legal matters shall be full and complete authorization and
         protection in respect of any action taken, suffered or omitted by it
         hereunder in good faith and in accordance with such advice or opinion.
         Such counsel may be counsel to the Guarantor or any of its Affiliates
         and may include any of its employees. The Guarantee Trustee shall have
         the right at any time to seek instructions concerning the
         administration of this Guarantee from any court of competent
         jurisdiction.

                           (vi) The Guarantee Trustee shall be under no
         obligation to exercise any of the rights or powers vested in it by this
         Guarantee at the request or direction of any Holder, unless such Holder
         shall have provided to the Guarantee Trustee such security and
         indemnity, reasonably satisfactory to the Guarantee Trustee, against
         the costs, expenses (including attorneys' fees and expenses and the
         expenses of the Guarantee Trustee's agents, nominees or custodians) and
         liabilities that might be incurred by it in complying with such request
         or direction, including such reasonable advances as may be requested by
         the Guarantee Trustee; provided, however, that nothing contained in
         this Section 2.2(a)(vi) shall be taken to relieve the Guarantee
         Trustee, upon the occurrence of an Event of Default, of its obligation
         to exercise the rights and powers vested in it by this Guarantee.

                           (vii) The Guarantee Trustee shall not be bound to
         make any investigation into the facts or matters stated in any
         resolution, certificate, statement, instrument, opinion, report,
         notice, request, direction, consent, order, bond, debenture, note,
         other evidence of indebtedness or other paper or document, but the
         Guarantee Trustee, in its discretion, may make such further inquiry or
         investigation into such facts or matters as it may see fit.




                                       6
<PAGE>

                           (viii) The Guarantee Trustee may execute any of the
         trusts or powers hereunder or perform any duties hereunder either
         directly or by or through agents, nominees, custodians or attorneys,
         and the Guarantee Trustee shall not be responsible for any misconduct
         or negligence on the part of any agent or attorney appointed with due
         care by it hereunder.

                           (ix) Any action taken by the Guarantee Trustee or its
         agents hereunder shall bind the Holders of the Capital Securities, and
         the signature of the Guarantee Trustee or its agents alone shall be
         sufficient and effective to perform any such action. No third party
         shall be required to inquire as to the authority of the Guarantee
         Trustee to so act or as to its compliance with any of the terms and
         provisions of this Guarantee, both of which shall be conclusively
         evidenced by the Guarantee Trustee's or its agent's taking such action.

                           (x) Whenever in the administration of this Guarantee
         the Guarantee Trustee shall deem it desirable to receive instructions
         with respect to enforcing any remedy or right or taking any other
         action hereunder, the Guarantee Trustee (A) may request instructions
         from the Holders of a Majority in liquidation amount of the Capital
         Securities, (B) may refrain from enforcing such remedy or right or
         taking such other action until such instructions are received and (C)
         shall be protected in conclusively relying on or acting in accordance
         with such instructions.

                           (xi) The Guarantee Trustee shall not be liable for
         any action taken, suffered, or omitted to be taken by it in good faith
         and reasonably believed by it to be authorized or within the discretion
         or rights or powers conferred upon it by this Guarantee.

                  (b) No provision of this Guarantee shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law to perform
any such act or acts or to exercise any such right, power, duty or obligation.
No permissive power or authority available to the Guarantee Trustee shall be
construed to be a duty.

                  SECTION 2.3 Not Responsible for Recitals or Issuance of
Guarantee.

                  The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.

                  SECTION 2.4 Events of Default; Waiver.

                  (a) An "Event of Default" under this Guarantee will occur upon
the failure of the Guarantor to perform any of its payment or other obligations
hereunder.

                  (b) The Holders of a Majority in liquidation amount of the
Capital Securities may, voting or consenting as a class, on behalf of the
Holders of all of the Capital Securities,



                                       7
<PAGE>

waive any past Event of Default and its consequences. Upon such waiver, any such
Event of Default shall cease to exist, and shall be deemed to have been cured,
for every purpose of this Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.

                  SECTION 2.5 Events of Default; Notice.

                  (a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders of the Capital Securities, notices of all Events of
Default actually known to a Responsible Officer of the Guarantee Trustee, unless
such defaults have been cured before the giving of such notice, provided,
however, that the Guarantee Trustee shall be protected in withholding such
notice if and so long as a Responsible Officer of the Guarantee Trustee in good
faith determines that the withholding of such notice is in the interests of the
Holders of the Capital Securities.

                  (b) The Guarantee Trustee shall not be charged with knowledge
of any Event of Default unless the Guarantee Trustee shall have received written
notice thereof from the Guarantor or a Holder of the Capital Securities, or a
Responsible Officer of the Guarantee Trustee charged with the administration of
this Guarantee shall have actual knowledge thereof.

                                   ARTICLE III

                              THE GUARANTEE TRUSTEE

                  SECTION 3.1 The Guarantee Trustee; Eligibility.

                  (a) There shall at all times be a Guarantee Trustee which
shall:

                           (i) not be an Affiliate of the Guarantor; and

                           (ii) be a corporation or national association
         organized and doing business under the laws of the United States of
         America or any state thereof or of the District of Columbia, or Person
         authorized under such laws to exercise corporate trust powers, having a
         combined capital and surplus of at least 50 million U.S. dollars
         ($50,000,000), and subject to supervision or examination by federal,
         state or District of Columbia authority. If such corporation or
         national association publishes reports of condition at least annually,
         pursuant to law or to the requirements of the supervising or examining
         authority referred to above, then, for the purposes of this Section
         3.1(a)(ii), the combined capital and surplus of such corporation or
         national association shall be deemed to be its combined capital and
         surplus as set forth in its most recent report of condition so
         published.

                  (b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 3.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set forth in Section 3.2(c).

                  (c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Guarantee Trustee shall


                                       8
<PAGE>

either eliminate such interest or resign to the extent and in the manner
provided by, and subject to, this Guarantee.

                  SECTION 3.2 Appointment, Removal and Resignation of the
Guarantee Trustee.

                  (a) Subject to Section 3.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor except during an
Event of Default.

                  (b) The Guarantee Trustee shall not be removed in accordance
with Section 3.2(a) until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.

                  (c) The Guarantee Trustee appointed to office shall hold
office until a Successor Guarantee Trustee shall have been appointed or until
its removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Guarantee Trustee has been
appointed and has accepted such appointment by an instrument in writing executed
by such Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.

                  (d) If no Successor Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 3.2 within 60
days after delivery of an instrument of removal or resignation, the Guarantee
Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Guarantee Trustee.

                  (e) No Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Guarantee Trustee.

                  (f) Upon termination of this Guarantee or removal or
resignation of the Guarantee Trustee pursuant to this Section 3.2, the Guarantor
shall pay to the Guarantee Trustee all amounts owing to the Guarantee Trustee
under Sections 7.2 and 7.3 accrued to the date of such termination, removal or
resignation.

                                   ARTICLE IV

                                    GUARANTEE

                  SECTION 4.1 Guarantee.

                  (a) The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Issuer), as and when due, regardless of any
defense (except defense of payment by the Issuer), right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.



                                       9
<PAGE>

                  (b) The Guarantor hereby also agrees to assume any and all
Obligations of the Issuer and in the event any such Obligation is not so
assumed, subject to the terms and conditions hereof, the Guarantor hereby
irrevocably and unconditionally guarantees to each Beneficiary the full payment,
when and as due, of any and all Obligations to such Beneficiaries. This
Guarantee is intended to be for the Beneficiaries who have received notice
hereof.

                  SECTION 4.2 Waiver of Notice and Demand.

                  The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

                  SECTION 4.3 Obligations Not Affected.

                  The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

                  (a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities to be
performed or observed by the Issuer;

                  (b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, the price payable upon the redemption of
the Capital Securities, the Liquidation Distribution or any other sums payable
under the terms of the Capital Securities or the extension of time for the
performance of any other obligation under, arising out of, or in connection
with, the Capital Securities (other than an extension of time for the payment of
the Distributions, the price payable upon the redemption of the Capital
Securities, the Liquidation Distribution or other sums payable that results from
the extension of any interest payment period on the Debentures);

                  (c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;

                  (d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

                  (e) any invalidity of, or defect or deficiency in, the Capital
Securities;

                  (f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or


                                       10
<PAGE>

                  (g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 4.3 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances.

                  There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

                  SECTION 4.4 Rights of Holders.

                  (a) The Holders of a Majority in liquidation amount of the
Capital Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of this Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under this Guarantee; provided, however,
that (subject to Sections 2.1 and 2.2) the Guarantee Trustee shall have the
right to decline to follow any such direction if the Guarantee Trustee shall
determine that the actions so directed would be unjustly prejudicial to the
Holders not taking part in such direction or if the Guarantee Trustee being
advised by legal counsel determines that the action or proceeding so directed
may not lawfully be taken or if the Guarantee Trustee in good faith by its board
of directors or trustees, executive committee or a trust committee of directors
or trustees and/or Responsible Officers shall determine that the action or
proceeding so directed would involve the Guarantee Trustee in personal
liability.

                  (b) Any Holder of Capital Securities may institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee's
rights under this Guarantee, without first instituting a legal proceeding
against the Issuer, the Guarantee Trustee or any other Person. The Guarantor
waives any right or remedy to require that any such action be brought first
against the Issuer, the Guarantee Trustee or any other Person before so
proceeding directly against the Guarantor.

                  SECTION 4.5 Guarantee of Payment.

                  This Guarantee creates a guarantee of payment and not of
collection.

                  SECTION 4.6 Subrogation.

                  The Guarantor shall be subrogated to all (if any) rights of
the Holders of Capital Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by applicable
provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if, after
giving effect to any such payment, any amounts are due and unpaid under this
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.


                                       11
<PAGE>

                  SECTION 4.7 Independent Obligations.

                  The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

                  SECTION 4.8 Enforcement.

                  A Beneficiary may enforce the Obligations of the Guarantor
contained in Section 4.1(b) directly against the Guarantor, and the Guarantor
waives any right or remedy to require that any action be brought against the
Issuer or any other person or entity before proceeding against the Guarantor.

                  The Guarantor shall be subrogated to all rights (if any) of
any Beneficiary against the Issuer in respect of any amounts paid to the
Beneficiaries by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any rights that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Beneficiaries and to pay
over such amount to the Beneficiaries.

                                    ARTICLE V

                    LIMITATION OF TRANSACTIONS; SUBORDINATION

                  SECTION 5.1 Limitation of Transactions.

                  So long as any Capital Securities remain outstanding, if (a)
there shall have occurred and be continuing an Event of Default or (b) Debenture
Issuer shall have selected an Extension Period as provided in the Indenture and
such period, or any extension thereof, shall have commenced and be continuing,
then the Guarantor may not (x) declare or pay any dividends or distributions on,
or redeem, purchase, acquire, or make a liquidation payment with respect to, any
of the Guarantor's capital stock, (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Guarantor that rank in all respects pari passu with or junior
in interest to the Debentures or (z) make any payment under any guarantees of
the Guarantor that rank in all respects pari passu with or junior in interest to
this Guarantee (other than (i) repurchases, redemptions or other acquisitions of
shares of capital stock of the Guarantor (A) in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors, or consultants, (B) in connection
with a dividend reinvestment or stockholder stock purchase plan or (C) in
connection with the issuance of capital stock of the Guarantor (or securities
convertible into or exercisable for such capital stock), as consideration in an
acquisition transaction entered into prior to the occurrence of the Event of
Default or the


                                       12
<PAGE>


applicable Extension Period, (ii) as a result of any exchange or conversion of
any class or series of the Guarantor's capital stock (or any capital stock of a
subsidiary of the Guarantor) for any class or series of the Guarantor's capital
stock or of any class or series of the Guarantor's indebtedness for any class or
series of the Guarantor's capital stock, (iii) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (iv) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (v) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior in interest to such
stock).

                  SECTION 5.2 Ranking.

                  This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees
to the foregoing provisions of this Guarantee and the other terms set forth
herein.

                                   ARTICLE VI

                                   TERMINATION

                  SECTION 6.1 Termination.

                  This Guarantee shall terminate as to the Capital Securities
(i) upon full payment of the price payable upon redemption of all Capital
Securities then outstanding, (ii) upon the distribution of all of the Debentures
to the Holders of all of the Capital Securities or (iii) upon full payment of
the amounts payable in accordance with the Declaration upon dissolution of the
Issuer. This Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any Holder of Capital Securities must restore
payment of any sums paid under the Capital Securities or under this Guarantee.

                                   ARTICLE VII

                                 INDEMNIFICATION

                  SECTION 7.1 Exculpation.

                  (a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission of such
Indemnified Person in good faith in accordance with this Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this Guarantee or by
law, except that an Indemnified Person shall be liable for any such loss, damage
or claim


                                       13
<PAGE>

incurred by reason of such Indemnified Person's negligence, willful misconduct
or bad faith with respect to such acts or omissions.

                  (b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Issuer or the Guarantor and upon such
information, opinions, reports or statements presented to the Issuer or the
Guarantor by any Person as to matters the Indemnified Person reasonably believes
are within such other Person's professional or expert competence and who, if
selected by such Indemnified Person, has been selected with reasonable care by
such Indemnified Person, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
Distributions to Holders of Capital Securities might properly be paid.

                  SECTION 7.2 Indemnification.

                  (a) The Guarantor agrees to indemnify each Indemnified Person
for, and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence, willful
misconduct or bad faith on the part of the Indemnified Person, arising out of or
in connection with the acceptance or administration of the trust or trusts
hereunder, including but not limited to the costs and expenses (including
reasonable legal fees and expenses) of the Indemnified Person defending itself
against, or investigating, any claim or liability in connection with the
exercise or performance of any of the Indemnified Person's powers or duties
hereunder. The obligation to indemnify as set forth in this Section 7.2 shall
survive the resignation or removal of the Guarantee Trustee and the termination
of this Guarantee.

                  (b) Promptly after receipt by an Indemnified Person under this
Section 7.2 of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the Guarantor under
this Section 7.2, notify the Guarantor in writing of the commencement thereof;
but the failure so to notify the Guarantor (i) will not relieve the Guarantor
from liability under paragraph (a) above unless and to the extent that the
Guarantor did not otherwise learn of such action and such failure results in the
forfeiture by the Guarantor of substantial rights and defenses and (ii) will
not, in any event, relieve the Guarantor from any obligations to any Indemnified
Person other than the indemnification obligation provided in paragraph (a)
above. The Guarantor shall be entitled to appoint counsel of the Guarantor's
choice at the Guarantor's expense to represent the Indemnified Person in any
action for which indemnification is sought (in which case the Guarantor shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the Indemnified Person or Persons except as set forth below);
provided, however, that such counsel shall be satisfactory to the Indemnified
Person. Notwithstanding the Guarantor's election to appoint counsel to represent
the Indemnified Person in any action, the Indemnified Person shall have the
right to employ separate counsel (including local counsel), and the Guarantor
shall bear the reasonable fees, costs and expenses of such separate counsel, if
(i) the use of counsel chosen by the Guarantor to represent the Indemnified
Person would present such counsel with a conflict of interest, (ii) the actual
or potential defendants in, or targets of, any such action include both the
Indemnified Person and the Guarantor and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it and/or
other Indemnified Persons


                                       14
<PAGE>

which are different from or additional to those available to the Guarantor,
(iii) the Guarantor shall not have employed counsel satisfactory to the
Indemnified Person to represent the Indemnified Person within a reasonable time
after notice of the institution of such action or (iv) the Guarantor shall
authorize the Indemnified Person to employ separate counsel at the expense of
the Guarantor. The Guarantor will not, without the prior written consent of the
Indemnified Persons, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the Indemnified Persons are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Person from all liability
arising out of such claim, action, suit or proceeding.

                  SECTION 7.3 Compensation; Reimbursement of Expenses.

                  The Guarantor agrees:

                  (a) to pay to the Guarantee Trustee from time to time such
compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and

                  (b) except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by it in accordance with any
provision of this Guarantee (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to the negligence, willful
misconduct or bad faith of the Guarantee Trustee.

                  The provisions of this Section 7.3 shall survive the
resignation or removal of the Guarantee Trustee and the termination of this
Guarantee.

                                  ARTICLE VIII

                                  MISCELLANEOUS

                  SECTION 8.1 Successors and Assigns.

                  All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case to the extent
permitted under the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Holders of a Majority in liquidation amount of the Capital Securities.



                                       15
<PAGE>

                  SECTION 8.2 Amendments.

                  Except with respect to any changes that do not adversely
affect the powers, preferences, rights or interests of Holders of the Capital
Securities in any material respect (in which case no approval of Holders will be
required), this Guarantee may be amended only with the prior approval of the
Holders of a Majority in liquidation amount of the Capital Securities. The
provisions of the Declaration with respect to amendments thereof shall apply
equally with respect to amendments of the Guarantee.

                  SECTION 8.3 Notices.

                  All notices provided for in this Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

                  (a) If given to the Guarantee Trustee, at the Guarantee
Trustee's mailing address set forth below (or such other address as the
Guarantee Trustee may give notice of to the Holders of the Capital Securities):

                           Wilmington Trust Company
                           Rodney Square North
                           1100 North Market Street
                           Wilmington, Delaware 19890-0001
                           Attention: Corporate Trust Administration
                           Telecopy:  302-651-8882
                           Telephone: 302-651-1000

                  (b) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders of the Capital Securities and to the Guarantee Trustee):

                           American Physicians Capital, Inc.
                           1301 N. Hagadorn Road
                           East Lansing, Michigan 48823
                           Attention: Frank H. Freund
                           Telecopy:  517-351-7866
                           Telephone: 517-324-6737

                  (c) If given to any Holder of the Capital Securities, at the
address set forth on the books and records of the Issuer.

                  All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.


                                       16
<PAGE>

                  SECTION 8.4 Benefit.

                  This Guarantee is solely for the benefit of the Holders of the
Capital Securities and, subject to Section 2.1(a), is not separately
transferable from the Capital Securities.

                  SECTION 8.5 Governing Law.

                  THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT
OF LAW PRINCIPLES OF SAID STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW.

                  SECTION 8.6 Counterparts.

                  This Guarantee may contain more than one counterpart of the
signature page and this Guarantee may be executed by the affixing of the
signature of the Guarantor and the Guarantee Trustee to any of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.

                  SECTION 8.7 Severability.

                  In case one or more of the provisions contained in this
Guarantee shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Guarantee, but this Guarantee shall be construed as
if such invalid or illegal or unenforceable proision had never been contained
herein.


                                       17
<PAGE>

                  THIS GUARANTEE is executed as of the day and year first above
written.

                                        AMERICAN PHYSICIANS CAPITAL, INC.,
                                        as Guarantor


                                        By:   /s/ Frank H. Freund
                                             ------------------------------
                                             Name: Frank H. Freund
                                             Title: Chief Financial Officer



                                        WILMINGTON TRUST COMPANY,
                                        as Guarantee Trustee


                                        By:   /s/ Donald F. MacKelcan
                                             ------------------------------
                                             Name: Donald F. MacKelcan
                                             Title: Vice President



                                       18