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Bike Insurance for Your Motorcycle

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

How bike insurance is similar to a car policy, why there’s a difference in premium, and when to carry full-coverage

green bike / motorcycle

Why you need a special policy to cover a cool ride.

Bike insurance has hit the big time. Only a few short years ago, insurance companies were squeamish about insuring Harley-Davidsons and Kawasakis. They’re now stepping over each other to add motorcycles to their policy rolls.

It has finally dawned on many of these companies that motorcycle insurance makes sense for both them and the rider. However, there are a few unique things to consider when writing a bike insurance policy.

Is it Similar To A Car Policy?

On the surface, motorcycle insurance operates in much the same way as automobile insurance. State minimum liability limits for motorcycles are the same as for cars. Motorcycles can also be insured for collision and comprehensive coverage.

However, on the whole bike insurance is considerably cheaper than car insurance. Indeed many companies are now advertising $100/year policies, an amount that can easily be a monthly payment for auto insurance. That said, as with automobiles it’s not always the best idea just to go for the lowest possible price when it comes to bike insurance.

Why Liability Coverage is Less Expensive for Bikes

A motorcycle is smaller than a car. The damage it’s likely to cause to other people’s property is less. For this reason, individuals with bike insurance can get away with lower liability limits than those who drive cars, but it is still not recommended to go just with state minimums.

Remember state required liability limits for property damage are outdated and quite low. Limits for bodily injury can be lower than for automobiles as well, but one shouldn’t skimp on those either for much the same reasons. While there’s no need to go crazy with liability limits, it is always a good idea to have limits high enough to cover the worst-case scenario.

Covering Injuries on Your Bike Policy

The real risk involved with motorcycle accidents is to the motorcyclist himself. For obvious reasons, regardless of fault, a motorcycle driver is much more likely to be seriously injured in an accident than an automobile driver.

It’s important to cover yourself, either with a good health insurance plan or with a generous medical payments on your bike insurance policy, preferably both.

Material Damage on Bike Insurance

Full coverage for bike insurance works the same way as it does for auto insurance. However, full coverage on motorcycles costs less because motorcycles usually cost less than cars.

That said, assuming there are no lienholders the question regarding full coverage for motorcycle insurance remains the same. If the bike stolen or seriously damaged, will it hurt you financially? If your answer is ‘yes’, you should probably keep full coverage.

How bike insurance is similar to a car policy, why there’s a difference in premium, and when to carry full-coverage

Car Insurance: What is It?

Written by Todd Clay. Posted in Definitions Last Updated: 10/05/2010

What is auto insurance, a short history, its components, and how it’s priced

Headlight On Car

Drivers need car insurance for financial protection.

Most US and Canadian drivers know they need car insurance, but what exactly is it? Simply put, car insurance is a financial protection used to cover losses caused by auto accidents and other vehicle-related mishaps.

Without auto insurance, people would have to pay for these losses themselves. That could easily bankrupt most drivers on the road in a serious accident. Car insurance protects your financial assets by covering physical damage and bodily injuries for auto-related incidents.

A Short History of Auto Insurance

Car insurance is considered part of the “property/casualty” family of insurance. In addition to automobile insurance, this includes homeowners, renters, and various forms of business insurance.

The roots of property/casualty insurance in America date to before the American Revolution. Originally these companies didn’t include auto insurance for a simple reason: there were few cars prior to the 20th century. There were even fewer serious vehicle accidents. Remember, 35 miles-an-hour speed would have been inconceivable until well into the 1900s.

Auto insurance dates to the early 20th Century. As cars on the road increased, car accidents incidents. Insurance companies soon discovered it could compensate drivers for their auto accident losses, but also make money while doing it. Some established property/casualty companies expanded into the market, while many others began as auto insurers.

Car Insurance Policy Components

In its most basic form, auto insurance consists of two components: liability and full coverage. Liability coverage covers both bodily injury and property damage to another vehicle if you’re found at fault in an accident.

In a “no-fault” state, each insurance company pays for its own insured’s losses, while only the insured found at fault sees a rate increase. In both cases the liability is defined by a pre-determined limit. All 50 states require all liability insurance at certain minimums.

Full coverage is further divided into comprehensive and collision sections. As the name implies, collision coverage covers your car for damages regardless of fault after a certain deductible is paid by the policyholder. Comprehensive, or “other than collision” covers other damage to your car. Common claims under comprehensive coverage include auto glass repair and replacement or damage caused by vandalism.

Other coverage commonly found in auto insurance include medical payments or personal injury protection (PIP), which covers bodily injury for you and people in your car if liability coverage isn’t applicable. There’s also uninsured and underinsured coverage (UM/UIM) which covers gaps in coverage if you’re hit by someone with inadequate insurance or no insurance at all.

How Auto Insurance Is Priced

Insurance is a business of statistics. Those drivers more likely to cause a claim pay more in premiums. Those with recent claims and tickets pay more than those who don’t. Gender and age are also taken into consideration. On the whole women pay a less than men. Drivers under 25 generally pay the most in premiums. Boys 18 and younger are usually the most expensive demographic.

However, after drivers turn 25, premiums usually drop until they bottom out in their 50s. Premiums start to creep up slightly again in the 60s. By age 74 a driver may once again be considered higher risk. As a reward, many companies will keep older drivers who have been with them for a long time at relatively low premiums.

High Risk Insurance for New or Bad Drivers

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

Why you may need high risk can insurance, what are the options, and how long do you have to carry the policy

red car upside down after accident

This car's driver may need high risk insurance pretty soon.

High risk insurance is not a pleasant experience. When insurance companies deem drivers ‘risky’, they send them to a special division (company) or refuse to write a policy altogether.

High risk auto insurance is not cheap. It’s not pretty. But the good news is it’s also not permanent.

Drivers with spotless driving records are typically placed in a ‘standard’ auto insurance company. These are companies that advertise on TV. Most people can stay in a standard company if they have a minor accident or a single ticket, but after that they’re forced to insure with a high risk company.

High Risk Insurance For Two Types of Drivers

High risk companies can be affiliated with the higher-profile standard companies or operate separately. Naturally, they are more expensive. High risk insurance companies to two types of drivers:

  • People with no (or recent) driving records.
  • People with less-than-perfect driving records.

Drivers With No Driving Record

Insurance companies typically define ‘no driving record’ as not having driven for the past 3-5 years. These drivers are often put in high risk insurance companies to establish their auto insurance history. These drivers tend to be genuinely new drivers who just got their license, or perhaps those who were licensed in the past but haven’t driven recently.

The potential of getting stuck with high risk insurance is yet another good reason to keep continuous coverage on your auto insurance.

Most people in this category can move to the standard companies in 6-12 months provided they maintain a clean driving record – though each company is different on when you can move.

Drivers With Bad Driving Records

Drivers with bad records are usually consigned to the high risk insurance companies for a longer period of time. If you have a driving violation that requires you to file an SR-22, which is basically a proof of minimum liability insurance coverage sent to the state, you’re almost certainly going to a high risk company for your auto insurance needs.

Don’t worry about the SR-22 itself though. High risk insurance companies are all quite familiar with them and will file them on your behalf for a nominal fee, or perhaps no fee at all. Just make sure to tell them you need it.

There’s one final thing to remember about high risk insurance companies. There’s no need to stay in them if you don’t have to. If you’ve been continuously insured and haven’t had an accident or claim in a few years, you don’t need to be there. A good insurance agent or broker will review your coverage periodically and let you know when it’s time to go back to the standard company. If you don’t have a good agent, it’s time to shop around.

Assigned Risk: Can’t Get High Risk Insurance?

But what happens when not even high risk insurance companies will insure you?

If you can’t get insurance with an insurance company, you have to get it from the state – also called the assigned risk pool. Since even the worst drivers are required to carry automobile liability insurance in all 50 states, it follows that they have the right to obtain that coverage.

Assigned risk means the state government takes the driver and assigns him to an insurance company that does business in that state. That company is then legally required to write a policy on that driver.

The state in turn subsidizes the program and sets the premium, which protects both the insurance company and driver to a certain degree. This allows even the worst drivers to legally stay on the road, at least until their driver’s license is revoked. Assigned risk is also expensive, and the coverage available is sparse, but for some drivers it’s the only option.

One nice thing about auto insurance is that nothing is forever. Most insurance companies only consider the last three to five years of a driving record. This means even the worst driver who has no hope of obtaining insurance outside the high risk pool today can eventually repair his or her record and go back to the standard company and its cushy safe driver discounts.

Sports Car Insurance for Your Ride

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

Things to consider when insuring an exotic, high performance, or other sports cars – such as raised limits, stated value, and more.

convertible sports car driving on sunny day

Don't forget coverage for your sports car before you drive off the lot.

There isn’t that much difference between insuring a sports car and any other car. But there are special considerations when dealing with sports car insurance.

In most cases the basics remain the same. All sports cars need to be insured to satisfy state liability requirements and any lienholder requirements for full coverage. This is particularly true if a sports car is intended to be driven rather than just looked at.

Raising Limits On Sports Car Insurance

Sports cars aren’t cheap. Insuring them isn’t cheap, either. Most companies consider sports cars to be significantly higher-risk models compared to run-of-the-mill SUVs and sedans. Premiums can therefore be quite expensive, even for low-risk drivers. This has nothing to do with the color of the car (the notion that a red sports car costs more to insure is a myth), but with the model itself.

Also, insurance costs may vary widely among different models of sports cars. For instance, high performance car insurance can be very expensive, while car insurance for other vehicles is cheaper. Each car and driver is quoted differently. Rates can also vary greatly between companies on higher-end vehicles – that’s why you should shop your rate.

You should also keep liability limits on actively driven sports cars high higher than state-mandated minimums. Sports cars attract attention across the board. This attention is not always welcome. If your sports car is in an accident – especially if you’re at fault – you are more likely to face litigation than if you just drove a Ford Focus. If that happens, you’ll be glad you had those higher limits.

The same holds true for material damage. Even when a sports car is paid off and the bank no longer requires full coverage, there’s probably a lot of intrinsic value in the car. Keeping full coverage after payoff is usually a good idea.

Consider Stated Value on Your Sports Car

Traditional sports car insurance may not be enough for older, collectable sports cars or expensive high-end models. For a typical auto insurance policy the vehicle’s value is determined by blue book and other market-driven factors. This may not translate well for classic cars or exotic models where a stated value policy may be more beneficial. In such a case, classic car insurance or an exotic car policy may be a better choice.

There are special considerations for these policies as well. For example, a classic car insurer may decline to insure a vehicle that is regularly driven, even if it qualifies otherwise. Consult your agent or broker for more information.

Kit Car Insurance For Your Hobby Car

Written by Todd Clay. Posted in Definitions, Research Last Updated: 03/23/2011

How kit cars are different, insurance considerations before and after building your own car.

auto parts for building kit car

Don't forget to insure your kit car before you start building!

A kit car may be the ultimate do-it-yourself project. It allows the hard core car enthusiast to build their own car from the ground up. But as with any car, kit cars need to be insured.

Given the unique nature of the kit car process, it’s insured differently as well. There are several kit car insurance considerations you wouldn’t even consider with standard factory-built cars.

How Kit Cars Are Different

Perhaps the important difference between kit car insurance and other types of auto insurance is the “builder’s risk” aspect of it. Whereas a standard automobile is built in a factory somewhere, and a classic car is built in a factory a long time ago, kit cars are by definition built by private individuals.

Auto factories carry a form of commercial insurance to cover their building process to protect against theft, damage and other perils that may hinder getting the finished product. In the same way, individuals constructing kit cars should insure during the building process as well.

Insuring the Kit Car Build

You should consider insuring a kit car before the first part is ordered. This provides coverage for such things as missing or damaged or parts during the building process. Without this coverage, a mishap involving parts could completely stop the build. After all, how much more useful is an unfinished kit car versus a totaled car?

Both cars just take up space.

Many traditional property and casualty insurers won’t insure kit cars (although some do). Even if your normal company doesn’t insure kit cars, they may have access to a kit car insurance market through a broker.

As with classic car insurance, there are several companies that specialize in the kit car insurance. Alternatively, you can shop for kit car insurance online. Check with your agent or broker for more details.

After Building Your Kit Car

Once the kit car is built, it’s insured in much the same way as a classic car. Material damage is covered at a stated value (generally the total amount spent to build the car) while liability is a secondary concern at best. State minimum liability limits must be satisfied to legally drive a kit car on the road.

If the car is meant to be primarily a display piece it’s not absolutely necessary. As with classic car insurers, most kit car companies won’t insure the finished product unless it’s used for primary transportation.

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