How Does Motorcycle Insurance Work?

POSTED BY Andrew Kass||

How Does Motorcycle Insurance Work?

Motorcycle insurance isn’t a sexy topic, but if you ride a motorcycle, it should be something you consider carefully. No one ever expects to be involved in a motorcycle crash, but thousands of accidents occur each year. In fact, even though motorcycle riders only make up about one percent of the miles traveled each year, they account for approximately 14 percent of annual road fatalities (NHTSA).

When you have completed this book, you will have a better understanding of motorcycle insurance, the types of insurance you should have, and how your insurance will provide for you in the event of a motorcycle crash. You will also know the important steps to follow if you are involved in a crash. By knowing these steps, you will help protect your ability to recover financially for your injuries. You will also understand the importance of having an experienced motorcycle crash lawyer on your side to handle your case.

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What Does Basic Motorcycle Insurance Cover?

If you ride a motorcycle, you should carry liability insurance. In fact, in most cases it is required by law to carry liability insurance. This insurance covers the cost of repairs and medical expenses to the other party if you are responsible for causing a collision. This insurance is vital to protect you and your assets if you have caused a crash. Without it, you would be responsible for paying for any repairs and medical expenses caused in a crash, which could easily be many thousands of dollars.

When considering the amount of liability insurance coverage, the general rule of thumb is to carry as much as you can reasonably afford. Vehicles are becoming more and more expensive, and we all know that medical costs are outrageous! Damages in a crash can be astronomical, and you do not want to be held personally responsible for these bills. You should also consider your abilities and the area in which you ride. If you are a new motorcyclist and live in an urban area, you probably want to carry more coverage than a very experienced biker who lives in a rural area.

Collision Insurance Coverage

Collision insurance will cover your own property damage and medical expenses in the event of a crash. This insurance covers the cost of expenses to repair your motorcycle, up to the value of the motorcycle itself. Also, it is important to understand that there is a deductible that you are responsible for before your insurance company pays out (your out-of-pocket expense).

Some people are involved in a traffic collision and are shocked to find out that their insurance company will only pay a small amount for the repair of their motorcycle. The truth is, your insurance company will not pay more than the value of your motorcycle, generally as determined by Kelly Blue Book (KBB) or a similar organization.

For example, KBB determines that your motorcycle is worth $1500. You are in a crash and the repair shop tells you that it will cost $2000 to fix your bike. Your insurance company will only reimburse up to the value of the bike ($1500). Also, you are still responsible for your deductible, meaning if you have a $500 deductible, you will receive $1000 from your insurance company (which equals the $1500 determined value of your motorcycle, minus your $500 deductible).

Insurance policies with higher deductibles, or out-of-pocket expenses, cost less than those with lower deductibles. If you are in a strong financial position and would not have trouble covering a large out-of-pocket expense, it might be wise to choose an insurance plan with a higher deductible in order to save money on your premiums. If, however, money is tight, you might want to pay a little bit more each month for your motorcycle insurance so that you would be responsible for less out-of-pocket if you were involved in a crash.

Comprehensive Coverage

Comprehensive insurance coverage is different from collision insurance because it covers damages to your own motorcycle if you are involved in a crash. Comprehensive insurance can also cover the cost of damages in the event your bike is stolen, vandalized, or damaged in a storm. If you have financed your motorcycle, comprehensive insurance is required. But even if you don’t carry a loan on your motorcycle, it’s a good idea to carry comprehensive insurance.

Medical Payments Coverage

Medical payments cover, also referred to as personal injury protection, can pay some of your medical or funeral costs for you and your passengers, even if you are considered at-fault in the crash. This coverage follows the policyholder, so you may be covered even if you are in another automobile or are a pedestrian or bicyclist struck by a car.

What Is Uninsured Motorist Coverage?

One of the greatest hazards to motorcyclists is the uninsured or underinsured motorist. The Insurance Research Council (IRC) found that 13 percent, or about one in eight, motorists are uninsured. This insurance can cover expenses like medical bills, lost wages, and pain and suffering if you are struck by an uninsured or underinsured motorist.

Bodily Injury Coverage

Bodily injury coverage pays for the medical expenses, pain and suffering, and lost wages of someone who is injured or killed as the result of an accident that you cause.

Property Damage Coverage

Property damage coverage pays the repairs or replacement value of any property you have destroyed in a crash that was your fault. This coverage may repair a damaged vehicle or other property, like a street sign or telephone pole.

How does trip interruption coverage work?

Trip interruption coverage can be a valuable addition to your motorcycle insurance policy, especially if you like to take your bike on long trips away from home. Trip interruption coverage pays for part of the cost of your trip in the event your bike is not operational. Generally, in order for this insurance to take effect, you must be a certain distance from home. You will have to show that your motorcycle was not operational and provide proof of lodging and meals paid in order to receive compensation. If you have added trip interruption coverage and find yourself in an eligible situation, remember to keep receipts for all of your expenses, including lodging and meals. Without documentation, you may not receive reimbursement for these expenses.

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Can I get coverage for custom motorcycle parts and accessories?

Bikers love to customize their motorcycles. From sidecars and antennas to custom paint and any number of electronics, customization is what sets one bike apart from the next. These modifications don’t come cheap, though. It’s not unusual for customizations to cost thousands of dollars. Custom parts and equipment coverage, or CPE, covers equipment and accessories added to your motorcycle after purchase. 

It is important to understand that this coverage varies from one insurance company to the next, and some companies may not offer it at all. If you have a lot of customizations on your bike, it’s important to sit down with your insurance agent and determine exactly what would (and would not) be covered in the event of a motorcycle crash.

If you carry CPE insurance on your motorcycle, it is important to document all of the modifications and customization that you perform. Keep receipts of all your purchases and take pictures of your motorcycle, both before and after customization. This can all come in handy when recovering money for your losses.

Motorcycle Transport Trailer Coverage

Some folks choose to transport their motorcycle long distances using a trailer. Often, motorcycle insurance companies will allow you to insure your trailer, as well. This is important, as trailers can be expensive. Most policies will cover transport trailers up to a set value, usually $7,500 or $10,000. Remember this is an added coverage option, so it doesn’t come automatically with your motorcycle insurance coverage.

Roadside Assistance For Motorists

You are out riding your motorcycle, enjoying the scenery and that raw feeling of power that only bikers know when it happens: you blow a tire. Or maybe your gas gauge is on the fritz and your bike sputters to a stop in the middle of nowhere. When these and other mishaps occur, it’s great to have a roadside assistance policy. Many insurance policies offer roadside assistance for a small additional premium.

Motorcycle roadside assistance can bring you fuel, oil, water, or fluids. They can also tow you to a service station near you or back to your home, depending upon the distance. They also provide emergency service in the case of a bad battery or a flat tire. It is important to understand that policies will vary in terms of the services they provide. Be sure you understand the full scope of your roadside assistance plan, like how many miles they will cover on a tow, before you need to utilize the service.

Motorcycle Coverage During Lay-Up Periods

Some riders are fortunate to live in an area with temperate weather and can ride year-round. For the rest of us, the winter months mean a period of time off the motorcycle. You may be tempted to drop your motorcycle insurance completely during the months that you don’t ride in order to save a little bit of money. But what would you do if your motorcycle was stolen while it wasn’t insured? Who would cover damages if someone backs into your motorcycle and destroys it? If you have no insurance in place on your motorcycle, you will be on your own to handle these disasters. Fortunately, there is a way to save money AND protect your motorcycle during the colder weather: a lay-up policy.

A lay-up policy or a lay-up period on your motorcycle insurance policy provides basic insurance protection for your motorcycle during the months it will be off the road. This insurance may protect you from theft or vandalism, and it will cover your motorcycle while it is kept in storage. Remember that this type of policy will not provide you with collision or liability insurance and cannot be used when you are riding your motorcycle. It is only intended for the period of time your motorcycle is not in use. Be sure to contact your insurance company and convert back to your full policy before you ride again in the spring.

Motorcycle Insurance Requirements

Most states require you to carry liability insurance in order to pay for property damages and medical expenses if you are found at-fault in a traffic accident. In addition, there are certain minimums in coverage that are required based on your state of residence. Please understand that these minimums are usually low and may not be enough to cover the expenses of another driver. In this case, you would be personally held responsible for these charges. That’s why it is important to carry ample liability insurance, generally above and beyond the state mandates. 

In order to register your motorcycle, you will be require to show proof of insurance. If you allow your policy to lapse and you are pulled over and found to be riding without insurance, you will face a hefty fine. In some states, if you are involved in a crash and you are riding without insurance, you forfeit much of your injury claim. For example, let’s consider a biker in California who loses a limb due to a crash caused by a distracted driver. If the biker did not carry insurance, they may forfeit much of their financial recovery. It’s simply not worth taking the risk.

 Everyone comes upon hard times, and sometimes it can be difficult to come up with money to pay your insurance premiums. If you can’t pay your premium- do not ride! Don’t make the mistake of assuming that just a few trips isn’t much of a risk. It’s not worth taking the chance. Before you get back on your bike, pay your premium and contact your insurance company to make sure you are up to date on coverage.

Does Your Motorcycle Insurance Cover ...

Replacement Value?

One of the crucial elements of your motorcycle insurance policy that you must understand is what it pays out in the event your motorcycle is stolen or destroyed. If you do not pay careful attention to this aspect of your policy, you may feel short changed and be left unable to purchase another motorcycle with the settlement you receive.

Actual Cash Value?

Many insurance policies pay out after a loss based on the actual cash value. This is sometimes referred to as the book value or depreciated value of a motorcycle. If your policy pays a settlement based on the actual cash value, you may find that you receive far less than you feel your motorcycle is actually worth.

Stated Amount?

If you own a very expensive motorcycle, you may find that it’s very costly to insure. In these cases, you may choose to insure your bike to a stated amount. Consider, for example, a motorcycle like the Dodge Tomahawk V10 Superbike (with a value of $550,000). A motorcycle like this will be very expensive to insure. You may, therefore, choose to select a stated amount insurance policy and have the insurance company provide $200,000 of coverage. This policy will cost less out of pocket, but you’ll be reimbursed for less money in the event of a crash. In most cases, insurance companies place a disclaimer stating that they will pay the lesser of the actual cash value or the stated amount, so you cannot inflate your stated amount and expect additional funds if your bike is destroyed.

How Much Motorcycle Insurance Coverage Do I Need?

Minimum motorcycle insurance requirements vary from state to state. Keep in mind, however, that the minimum coverage may not be enough to cover expenses after a motorcycle crash. If your insurance is not adequate to cover property or damages and are you found at fault, you can be held personally responsible for thousands of dollars in expenses. Some states, for example, require you to cover up to $50,000 in medical expenses per crash (with up to $25,000 per person) and $15,000 in property damages. Medical costs after a crash can involve the costs of the ambulance, emergency room personnel, physicians, tests and scans, medications, and ongoing treatment. These costs can easily exceed the minimums. And as vehicle prices skyrocket, property damage can often be more than the $15,000 minimum coverage.

Motorcycle insurance coverage can protect you from losing your life savings in the event of a crash, so it’s critical to purchase a solid policy. Often, you can double or triple the amount of coverage for just a few dollars extra, so have your provider price out several coverage options for you and purchase the best policy can you afford.

What Kind of Motorcycle Insurance Policy Is Best?

In general, the greater coverage you carry, the better. Even if you have never been involved in a crash, you don’t want to be liable for thousands of dollars in expenses in the event you do get in an accident one day. If you own a home or have money saved, you could risk losing it if you do not have enough insurance coverage.

Which Motorcycle Insurance is the Cheapest?

Shopping for motorcycle insurance can be frustrating. It is time-consuming to reach out to different insurance companies and repeatedly share the details of your needs and personal information. The cost of a motorcycle insurance policy can vary considerably from company to company, though, so it really does pay to shop around.

How To Shop For Motorcycle Insurance 

Buy from a company where you currently hold policies

Often, by purchasing motorcycle insurance from a company where you hold other policies (for example, homeowners or renters insurance or car insurance), you can save money. On average, you can save about 16 percent on your policy by bundling it with another policy. This huge savings can really make a difference, so always shop with your current insurance company first.

Keep a clean driving record

One of the best ways to keep your insurance rate low is to maintain a clean driving record. Speeding tickets and other offenses can dramatically raise your insurance premiums and can even cause some insurers to drop your policy. Remember when you get a ticket, you have to pay the fine but also your insurance rates will increase, so be sure follow traffic laws.

Take a motorcycle rider training course

Training courses are great for riders of all levels. Even if you are an experienced biker, taking a motorcycle safety course can lower your motorcycle insurance rate. In many states, you must take a motorcycle course prior to getting your license. In addition to helping you save money, these courses can help you learn how to avoid a crash!

Belong to a motorcycle organization

Being a part of a motorcycle organization can get you a break when it comes to insurance premiums. Often, members get discounted rates simply by maintaining membership in a known motorcycle organization. While your local riding club probably won’t help you save money, memberships with the American Motorcyclist Association, Harley Owners Group, and other well-known motorcycle organizations can save you money.

Ask about any other discounts

Some insurance companies offer discounts based on your employer or group affiliation. Be sure to ask about these additional discounts. If you are employed by a large company, flip through your benefits package as it may have information about which companies offer a discount.

What you should know about suspending insurance during winter months

Your insurance company may give you the option to suspend insurance coverage during the winter months. This can save you a bit of money, but there are a few things to keep in mind. If you have financed your motorcycle, you may need to keep it insured even if you aren’t riding it actively. Also, keep in mind that theft can occur at any time of the year. If you do choose to suspend coverage for the off-season, don’t forget to resume it before you ride again.

"NHTSA" (PDF). DOT.gov. Retrieved 16 July 2017.