Motorcycle insurance will help you pay for damage your bike sustains in accidents or from other hazards. It can also help you cover your injury costs or the damage you cause others if a wreck is your fault. All in all, a policy can go a long way towards protecting you in case you face costly repair costs. However, there are costs that you will have to pay yourself, such as your policy deductibles. What are these? How do they work?
What is a deductible?
Insurance deductibles come attached to many portions of your policy. Based on their values, they might impact your cost burden for accidents. However, they can also help you save on your insurance costs as long as you use them appropriately.
When you file a claim on your motorcycle insurance, you state that you want your insurer to cover the costs of an unexpected or unavoidable hazard impacting the bike. Your insurer will then review the losses you claim and decide how much they will pay you for them. One of the factors that might impact this cost is your policy’s deductibles.
A deductible is a cost that the insured motorcyclist agrees to pay towards their own losses. The insurer will subtract the deductible from the settlement they will agree to pay you. As a result, the amount of money you receive from the insurer will not likely equal the full cost of your bike’s damage. Your deductible will essentially act as a cost sharing mechanism.
What parts of my motorcycle insurance include deductibles?
All car insurance policies vary, so the deductibles present on any policy can vary, too. However, there are typically two portions of policies that will include them.
- Collision Insurance: This coverage pays for damage to your bike following a wreck.
- Comprehensive Insurance: With comprehensive coverage, you can pay for bike damage from hazards other than collisions. Damage from fires, vandalism, theft, falling objects, severe weather or animal strikes usually falls under comprehensive coverage.
On the other hand, liability insurance usually will not include a deductible. Liability coverage does not pay the insured biker directly. Instead, it pays other parties who sustained property damage or injuries in an accident that was the insured biker’s fault.
A third type of coverage that might include a deductible is your uninsured/underinsured motorist coverage. This coverage helps you repair your own bike damage when another driver is at fault for a wreck, but lacks adequate liability insurance. However, some un/under policies don’t include deductibles. In a perfect world you likely would have been able to file against the other driver’s liability policy.
How do deductibles work?
Most motorcycle insurance lets policyholders choose from several different deductibles when enrolling in their coverage. For example, your collision coverage might include deductible options of $500, $1,000, $2,500, $5,000. Let’s say that you choose the $1,000 option.
If you have a wreck while on a ride, then the $1,000 deductible will influence how much your insurer pays you. For example, your insurer might appraise the bike’s damage and estimate it will cost $3,000 to make the repairs. However, because you have a $1,000 deductible, the insurer will only agree to pay you $2,000 for the damage. You cover the rest because, by taking the $1,000 deductible, you agreed to pay that cost of your repairs.
The catch is that if the cost of damage is less than the deductible value, your policy won’t pay at all. If you have $800 in bike damage, for example, then your policy won’t pay. You indicated that you would pay the first $1,000 in damage costs, and $800 is less than $1,000. However, some damage, such as glass damage, will not require you to pay a deductible at all.
What if I total the bike?
Should you total your motorcycle, your collision deductible might also apply. Your insurer will settle a cost on you based on the bike’s value. Usually, policies will pay you the bike’s used value (its actual cash value).
For example, suppose you wreck a five-year-old bike. A new bike might have cost $10,000, but after five years it is only worth $4,000. A cash value settlement will pay you the $4,000 cash value minus your deductible. If you have the $1,000 collision deductible, then you can receive $3,000 in compensation.
What are the cost benefits of deductibles?
The convenient thing about deductibles is that they are often adjustable. They can thus help the cost-conscious motorcycle insurance holder choose a cost burden that works for them.
If you carry a higher deductible, then you can often save money on your premium. Yet, you might also decrease your deductible to make it easier to afford your share of repair costs. At the end of the day, you should choose a deductible that you can afford to pay out of pocket. On one hand, this might drive up your premium cost a bit. On the other hand, this price increase might be manageable, much more than the burden of a high deductible.
Also Read: The Importance of Motorcycle Lights