What You Need to Know About Motorcycle Insurance Part 3: Kinds of Motorcycle Insurance Coverage Jeff Boyd+ November 11, 2020

“I Have Insurance”

The fact that you have “some” insurance doesn’t really mean anything.

A lot of people don’t understand what insurance coverage they have, let alone what  insurance coverage they should have, until it’s too late. Many insurance agents are  unfamiliar with the special needs of bike owners, and some are too interested in getting your business by “saving you money” than by selling you a good policy.

Most people feel pretty comfortable with their insurance. That is because most people have never had a significant claim. Your agent may be your friend – but your agent has nothing to do with your claim should you have a wreck.

Insurance companies are split into two personalities: the “money in” part (your agent) and the “money out” part (the claims adjusting group). If you have anything other than a very minor claim, you will quickly find out that the “money in” door is a lot bigger and a lot friendlier than the “money out” door. The minute you have a substantial claim, most insurance companies treat you with all the respect they would treat an “outside” person who is making a claim: as a stranger, not as a trusted customer.

What you don’t know will hurt you. I write this from the perspective of a lawyer that has represented many, many riders who have been in wrecks only to find out that their “full coverage” policy doesn’t begin to do what they need it to do. I have no financial interest in this advice – I’m not trying to sell you insurance. I am giving you real-world information to protect you against the ruin that will come to you if you are in a wreck and don’t have the kinds of insurance coverage and the amounts of insurance coverage that you need.

Kinds of Motorcycle Insurance Coverage

A typical insurance policy consists of the basic insurance agreement, plus amendments (changes that are usually specific to a state), plus endorsements (changes that are special to your policy). Amendments and endorsements may either add to the basic coverage or subtract from it.

The typical coverages that are available are:

  1. Bodily Injury Liability
  2. Property Damage Liability
  3. Uninsured/Underinsured Motorist Bodily Injury
  4. Uninsured/Underinsured Motorist Property Damage
  5. Personal Injury Protection
  6. Collision
  7. Comprehensive 
  8. Towing & Storage

So what is all this stuff??? The first thing you need to know is that there is no such thing as a standardized “full coverage” policy. There is such a thing as a “state minimum” policy, but it is about as worthless as training wheels on a rocket. Insurance policies are like tattoos – no two are alike. So let’s look at what kind of coverages there are, and what amounts of coverage you need.

We’ll work from the perspective of three typical wrecks.

Wreck A is nobody’s fault. You are coming home from Bike Night somewhere when a damn deer jumps out in front of you. You lay it down, skin up your bike, and break your leg (never mind what happens to the deer).

Wreck B is your fault. You are enjoying a beautiful day, and you fail to yield when you should have. You plow into the side of a minivan full of mom and dad and three kids. You aren’t hurt, but your new bike is toast. Unfortunately, the real problem is that the minivan has a big dent in the side and everyone in it is yelling “whiplash.” The next day, you get a letter from a lawyer you’ve seen on TV who says he’s going to sue you.

Wreck C is the monster. You are riding along minding your own business and some fool on his cell phone in an SUV “doesn’t see you.” As he changes lanes, he grinds you into the guard rail. The bike you just spent six months customizing is a mess, and you are hurt bad enough that you have to be taken by helicopter to the nearest trauma center. There you undergo four hours of surgery, four days in intensive care, a second surgery, six more days in the step-down unit, and go home to several months of physical therapy and rehab – all while you are off work. You’re going to have scars and a limp for the rest of your life. But best of all, the SUV driver “forgot” to make his insurance payment, so his insurance was cancelled, and his personal net worth is whatever cash he has in his wallet that day.

Let’s start with what the State of Washington requires you to have. If you want to “be legal,” you only need to have coverages in the amount of:

  • $25,000 for bodily injury or death of one person in any one accident;
  • $50,000 for bodily injury or death of any two persons in any one accident;
  • $10,000 for injury to or destruction of property of others in any one accident.

That’s all. Beyond that, if you have a loan on your bike, the almighty bank will probably require that you have enough Collision Coverage to pay off the loan if the bike is totaled. All the rest is up to you.

Now let’s look at Wreck A. With the “state minimum” policy + standard Collision Coverage, the only thing that will apply is the Collision Coverage. Hope you have health insurance! Hope it pays in the event of an accident! If your bike is damaged, but not totaled, be prepared to be without it for a long time; worse, if it is “totaled,” I hope your idea of what the bike’s “fair market value” is matches the insurance company’s idea of the FMV (more about this below).

Wreck B: With the “state minimum” policy + standard Collision Coverage, you have all the problems of Wreck A, but now you have a couple of nasty new problems. Your Liability Coverage now kicks in. BUT – the estimate to fix the minivan is $13,000, plus the cost of the rental car while the mini is in the shop – another $1,000. The estimate to “fix” the personal injury claims of the five people in the van is $18,000 each. Since you have Property Damage Liability limits of only $10,000, you get a bill for the extra $4,000 on the van. Ouch. But you have Bodily Injury Liability Coverage, right? Yes, but – you only have $25,000/$50,000 limits. Here, that means that any one person in the van can get a maximum of $25,000. So you’re good, right? No. Because five times $18,000 equals $90,000. So you get a bill for $90,000 minus your maximum limits of $50,000. You are personally on the hook for $40,000 (plus the $4,000 for the property damage). Know a good bankruptcy lawyer???

Wreck C: Here, with the “state minimum” policy + standard Collision Coverage, you are really, really screwed. Your bike loan will get paid off, maybe, but that won’t matter because you are on the one-way road to bankruptcy, whether you know a lawyer or not. That cellphone-talkin’ idiot has just cost you anywhere from $100,000+ in medical bills and $15,000+ in lost wages – and NO ONE is going to pay you ANYTHING.

You say “that can’t be right!” But the fact is, the idiot will never pay you a dime, because he will just go file bankruptcy himself! And with a “state minimum” policy you don’t have ANY coverage that helps you! If you don’t have health insurance, YOU are going to get a bill for that $100,000+, and if you do have health insurance, your deductibles and co-pays may leave you with balances you can’t begin to pay. Yes, you may lose your home and your car and everything else because you couldn’t make the payments while you had no income. No, there is no magic “fund” out there to pick up the slack. And all the money and time you put into making your bike beautiful is just g-o-n-e.

Now, really, did your friendly insurance agent explain all that to you while he was trying to save you 15% in 15 minutes?

Taken from: What you Need to Know about Motorcycle Insurance