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Understanding Motorcycle Insurance: The
Basics
Motorcycle insurance covers you and/ or the cost of you motorcycle
in the event of an accident or theft. There is a wide array of insurance
coverage options available for you and your motorcycle. Insurance agents often
fail to explain these options very well.
Below is a list of the different types of motorcycle insurance
coverage to help you make sense of your different options.
Liability Insurance
Liability insurance covers you in the event that you are at fault
in an accident. It covers “Property Damage” as well as “Bodily Injury.” Most
states require vehicle owners to carry a small amount of liability insurance.
Property damage pays for damage that you cause to the property of
another person if you are at fault in the accident. This can include the cost
to repair or replace their vehicle, as well as any personal property that may
be damaged in an accident.
Bodily injury coverage pays for damage that you cause to another
person if you are at fault in an accident. This can include hospital bills as
well as pain and suffering. These costs can be extremely high, and if you are
at fault in an accident, you may be financially responsible for all medical
expenses (and pain and suffering) that exceed the amount of you coverage. In
other words, if you have only $15,000 in coverage, and you cause a person
$250,000 in medical expenses and pain and suffering, the insurance company is
only responsible for the first $15,000. That could leave you owing $235,000!
Make sure you have plenty of coverage. “State Minimum” coverage – that is, the
amount of coverage required by state law – is typically very low. This may not
offer sufficient coverage in the even of a major accident where you are deemed
to be at fault.
The amount of your bodily injury liability coverage is usually
stated in terms like “15/30” or “100/300.” The first number represents the
amount of coverage per on person who sues you. For example, in a “15/30”
policy, that means that you insurance would only pay out $15,000 to any single
person. A “50/100” policy will cover you up to $50,000 to any single person who
was with you.
The second number is the total the will pay out, no matter how may
people you injured. In a “15/30” policy, that means your insurance company will
only pay out a total of $30,000 if you injured multiple people. In other words,
if you hit an SUV carrying six passengers and all of them were severely
injured, the insurance company would only pay $5,000 to each person ($5,000 per
person, times 6 injured passengers = $30,000.) Of course, it is unusual for a
motorcyclist to injure half a dozen people in an accident. This is why
liability insurance is relatively inexpensive for motorcycles vs. cars.
Collision and Comprehensive
Collision coverage pays to repair your motorcycle in the even of an
accident, regardless of who is at fault. If another driver is at fault and you
have collision coverage, usually your insurance company will pay for the
damage, the go after the other drivers insurance to cover the costs. You may be
responsible for part of the expense of the repair, however. This is called your
“deductible.” For example, if you have a deductible of $500, the insurance
company will pay for any damage over $500. So if the
cost of repair of your bike is $3,000, the insurance company will only pay
$2,500. You will be responsible for the other $500 (the amount of your
deductible).
Comprehensive coverage also pays for damage to your bike that is
not a result of an accident. That includes theft, vandalism, or natural
disasters. If you have a valuable bike, it is a good idea to carry
comprehensive insurance. (And if you have financed your motorcycle, most if not
all finance companies require you to carry comprehensive insurance. They want
you to protect their collateral.)
A final note about comprehensive insurance. It only covers the
value of your bike, not necessarily what you owe the bank. If your bike is
worth $10,000, but you owe $15,000, insurance will only cover the $10,000
(minus your deductible, of course). To protect against this you can get “Gap
Insurance.” This is commonly offered when you purchase or finance a bike Gap
Insurance covers the difference between what you owe to the bank or finance
company for the bike, and what your insurance company pays out as a “value” on
your bike.
Uninsured/ Underinsured Coverage
This is vitally important! The vast majority of motorcycle
accidents involving automobiles are the car-driver’s fault. To make things
worse, many car drivers out there are uninsured, and many more do not carry
sufficient insurance to cover you in the event of a major accident where they
were at fault. Uninsured/Underinsured coverage (aka “Un and Under”) covers you
in the event that an at-fault driver hits you. This can cover your motorcycle
(property damage) and any bodily injury you may sustain (medical expenses as
well as pain and suffering). Like liability insurance, this is measured in
terms of property damage and bodily injury coverage.
Unfortunately,
medical expenses resulting from motorcycle accidents are often substantial.
Uninsured coverage can cover you for the cost of medical expenses, as well as
pain and suffering in the event of an accident with an uninsured driver. Far
too often, motorcyclists are injured by drivers without insurance, or without
enough insurance. It is a very good idea to carry as much Uninsured coverage as
you can reasonably afford. (Also, it is worth noting that "maximum
coverage" often does not cost too much more than "minimal coverage!")
“Full Coverage”
The phrase "full coverage" is often used. What does it
mean, exactly? The answer, unfortunately, is not a whole lot. "Full
coverage" means different things to different people. An insurance agent
will tell you it means one thing, a bank will tell you another, and an attorney
will tell you yet another. So what should it mean to you? The answer is:
NOTHING.
You
should be informed as to exactly what kinds of coverage you have, including the
maximum dollar amounts of coverage and the deductible. Avoid the lazy
short-cut phrase of "I want full coverage" when you are getting or
reviewing your coverage with your insurance agent. Go through each and every
one of the coverage’s available. Thousands of motorcyclists who have been
injured in accidents who THINK they have "full coverage" are
heart-broken to learn that they may be out-of-pocket for thousands of dollars
for an accident where someone else was at fault!
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