The Dirty Insider Secret Of Your Motorcycle Insurance Coverage
When are you best interests not served when you’re buying insurance for your motorcycle? When they collide with the best interests of your insurance provider…
Insurance agents and underwriters have a dirty little secret they’d prefer you remained ignorant of: They always encourage lower limits and high deductibles.
Why would they do that?
A little insider stat called Loss Ratio.
The big underwriters crunch the numbers obsessively, and they have the math honed to an exact science. In the motorcycle world, the “acceptable” loss ratio for most companies is right around 70% of the total written premium.
Okay, what the hell is a “written premium?”
Well, my friend, the “written premium” is the total amount of business a an agent sends to a particular insurance provider in a calendar year. If the agent writes $1,000,000 in annual policies for the largest motorcycle underwriter in the country, he has an expectation that there might be $600,000 worth of loss payments (between bodily injury and property claims) handed out that year. That loss ratio of 60% is hovering right on the threshold of losing the underwriter and the agent money for the year.
How does that work? Like this. If underwriters and agents sell you higher limits, it means you’ll reach the profit threshold that much faster, and that’s just good business. It’s a critical number for agents as they can be suspended from writing new business if their loss ratio is too high.
Comprehensive coverage usually has deductibles from $0-$1000. Premiums go up when you choose a lower deductible, but there’s a limit in change, so make sure to ask about the difference in price. Say you buy a dual-sport bike. It’s usually just a few dollars of difference in premium payments between a $500 and $250 deductible for a guy over 25 years of age with a solid driving record, so in this case, you should pick the low deductible.
On the other hand, if you’ve got an expensive custom bike, though it sounds kind of crazy, go for a higher deductible.
If you have the cash to afford a seriously expensive custom motorcycle worth $30,000 or more, it also means you can afford the financial responsibility of a $1000 deductible. Do it.
Custom (and attractive collector bikes) are difficult to insure and the rates are usually not far off what some kid on a hot sport bike would pay in premiums. You might as well keep that premium low and take some of the responsibility of protecting your investment on your own shoulders.
With comprehensive insurance you ‘ll be covered against damage in single-car accidents and vandalism. If your motorcycle insurance only covers liability, then you ‘ll need to depend on the insurance of the opposing driver to take care of the damages.
It seems complicated, but obtaining the right motorcycle insurance policy will help you keep your motorcycle on the road.
The last and most important piece of advice we can give you?
Be patient when you shop for your policy.
Don’t rush into buying a motorcycle insurance policy. In the end, your level of comfort and happiness with your motorcycle insurance policy will be directly proportional to the time you spent reviewing your options.