5 Key Terms to Know When Shopping for Motorcycle Insurance

Important Terms Relevant to Motorcycle Insurance

  • Collision Coverage
  • Comprehensive Coverage
  • Liability Insurance
  • Customized Motorcycle Parts
  • Settlement Coverage

Knowledge of motorcycle insurance terminology is important when purchasing motorcycle insurance. Getting the wrong or insufficient insurance coverage can be almost as damaging as not having any insurance. Depending on the state in which a person lives, motorcycle insurance may be required year-round or just for six months of the year. Drivers should know what they are paying for and what they actually need so they can have adequate protection. For instance, if a bike isn’t going to be driven in the winter, the owner may want to suspend or change the type of coverage. Here are 5 key terms customers should know before buying motorcycle insurance.

Collision Coverage

Collision coverage is insurance protection if a driver hits or “collides” into something. Collision coverage pays to have the bike owner’s bike repaired if he damages it by colliding into something such as another vehicle, a ditch or some other type of property. Collision insurance usually has a deductible, which means the amount the insured must pay on a claim before the insurance starts paying. Deductibles can be from $100 to $1,000 or more. The higher the deductible, the lower the premium.

Comprehensive Coverage

Comprehensive insurance is almost the opposite of collision insurance. It provides coverage when something (other than another vehicle) hits the driver or his bike. This might be a bird, a deer, a baseball or may also be damage done by weather-related things like hail or wind damage. There are usually deductibles with collision coverage. Again, the lower the deductible, the less the insured will have to pay for damages but the higher the premiums will be. Collision coverage is generally less expensive than collision coverage.

Liability Insurance

When people say that they’re required by law to have car or motorcycle insurance, liability insurance is of what they are referring. Liability insurance is required in all the states. Many people mistakenly believe that liability insurance will pay for damages to their motorcycle if they hit a deer or slide in the ditch or whatever. Liability insurance will not pay for any repairs to the motorcycle. Its purpose is to protect drivers from a lawsuit if they’re at fault and sued. It also pays for property damage or bodily injuries caused to others in an accident.

Customized Motorcycle Parts

Customized motorcycle parts coverage is ideal for the motorcycle owner who enjoys customizing his bike with all the latest gadgets and technology features and accessories. While some motorcycle owners purchase a motorcycle for leisure riding and cheaper transportation, others drive almost year-round in all types of weather and situations. These bikers often spend thousands of dollars on accessories and want to ensure their accessories and add-ons are covered in the case of an accident. Without this coverage, the insurance company will either limit their coverage or will only pay for factory parts.

Settlement Coverage

Imagine a motorcycle driver sliding down into a tree, totaling out his motorcycle only to find out his motorcycle insurance doesn’t cover the total replacement cost because he mistakenly chose a policy or company that pays the value after depreciation. This happens to many drivers because they’re unfamiliar with settlement coverages.

  • Actual cash value – Although it’s the most common type, this considers depreciation when determining the payout amount. The insurance company will pay the market value of the bike at the time the claim is made. It generally doesn’t cover the actual cost to replace the bike if it was a total loss.
  • Replacement cost – This coverage pays the cost to have the bike replaced without considering depreciation. Drivers with a bike less than three years old often chose this settlement type.
  • Agreed value settlement –This coverage will lock in a specific value and for a specific price agreed upon by the owner and the insurance company. Collectors or owners with customized or classic motorcycles often choose the type of settlement coverage.

Related Resource: 10 Great Ways to Save on Motorcycle Insurance

The Insurance Information Institute states that choosing the right motorcycle insurance is every bit as important as choosing the right motorcycle. People don’t generally purchase the first motorcycle they see, and the same caution should be used when purchasing motorcycle insurance. Being familiar with motorcycle insurance and the important insurance terms can help an individual choose the policy that best meets their needs and pocketbook.