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Review Your Insurance Coverage

At one of our meetings couple years ago, our motorcycle group had an insurance agent give a talk about proper insurance coverage. We all learned a lot, and this info is worth passing on. 

 

Spring is a good time to review your policies, and most of this can be applied to car insurance also. 

 

The following info applies to New York State insurance laws. I do not know how much, if any, may apply to any other state. Call your agent and ask some questions – that’s what you’re paying for, after all.  

 

 

Definitions:

 

1.      BODILY INJURY & PROPERTY DAMAGE LIABILITY

            The driver is covered after an accident up to the policy limits for bodily injury lawsuits and property damage caused by the driver. A passenger is covered under this section, up to the policy limits, if the driver of the motorcycle (MC) is deemed at-fault. If the driver of the MC is not deemed at-fault, then the driver and passenger would attempt to collect from the responsible party’s insurance.

2.      MEDICAL PAYMENTS

            Affords medical payments to the driver and passenger up to policy limits, regardless of fault.

3.      SUPPLEMENTAL UNINSURED/UNDERINSURED MOTORIST (SUM)

            This coverage will protect the driver and passenger up to the policy limits for bodily injury if the other party has no liability or a limit of liability that is less than the bodily injury limit carried by the driver. (named insured)

4.      PEDESTRIAN PERSONAL INJURY PROTECTION

            If the driver of a MC strikes and injures a pedestrian, the ped is protected up to the policy limits.

5.      COMPREHENSIVE

            Subject to the deductible, protects MC against fire, theft and vandalism.

6.      COLLISION

            Subject to the deductible, allows named insured to repair MC after an accident, regardless of fault.

 

 

            When young drivers buy their first MC, they call the insurance agent and usually buy liability only, because cost is important to them. As we get older and we get newer and better MC’s, and we have more assets to protect, our MC policy should reflect those changes.

 

            If the driver of a MC hits something or someone, liability (#1) kicks in on your policy. For example, if you’re riding down the road and you rear-end or strike an object, your property damage part of your policy will cover for that damage. Statistically speaking, it’s usually another vehicle pulling out in front of a MC, or someone hitting you, not the other way around, but that’s where liability coverage will come into play.

 

            Whether it is car insurance or MC insurance, after an accident, everyone wants to know how much coverage he or she has to protect themselves. The state minimum for liability is $25K, and the maximum you can purchase is $500K. New York State makes that onus put on the buyer. People can have the state minimum, or you can purchase higher limits. So, as your policies come in for renewal, look at how much coverage you have and potentially how much you need. 

 

            Q. How do you know what you potentially need?

            A. If someone has assets or a net worth of 200K, and yet the MC policy only

            covers 25K, and you are sued in a lawsuit, potentially there will be a gap in

            insurance and they can put a lien on your assets. If you take the minimum, and

            you’re in an accident and get sued for 200K, your insurance only will cover 25K. 

            Someone’s going to attempt to get that 175K however they can. A retirement plan,

            home equity, savings accounts, wages can all be something an attorney can go

            after.

 

            The passenger on a MC is covered up to the policy limit if the driver of the MC is deemed at fault.   For example, Luann is driving with Rob on the back. She doesn’t brake in time and hits the vehicle in front of her. Both get knocked off the bike and Rob breaks an elbow. The accident is Luann’s fault, and her limit of liability will be primary if Rob decides to sue her. You need to protect yourself, not only if you injure someone in another car, but you need to protect passengers on a bike if you are at fault. 

 

            If the driver of the MC is not deemed at fault, both driver and passenger would attempt to collect from the cars insurance policy. For example, a driver and passenger are going down the road and a little old lady pulls out in front of them. They hit the car, flip over the hood and are badly injured. They then try to collect from the car insurance policy, but in New York State, car insurance policies can have a little coverage or a lot. You can protect yourself from that scenario by purchasing better coverage on your own MC policy to cover this kind of incident.   

 

            Medical payments (#2) are an optional coverage, which cover the driver and passenger regardless of who is at fault. It is a secondary coverage, typically only up to $5000 per person.   If you are riding your MC and are injured when someone pulls out in front of you, you are going to collect from the car insurance policy (that’s primary), then the $5000 would be secondary. It’s important to have good health insurance when you own a MC.

 

            Tying it all together is #3, Supplemental Uninsured/Underinsured Motorist (SUM). In New York State, you can purchase a minimum of 25K liability (#1).  The maximum you can collect for SUM (#3) has to match the coverage of liability (#1). You can’t get 25K of liability (#1) and take out 300K of SUM (#3). If that 18 year old driver pulls out in front of you, knocks you off your bike and you go to sue them, and they only have state minimum (25K), once they exhaust their policy, there is no more insurance to collect from them. If they only have state minimum, the chances of getting anything above and beyond that are slim for an 18 year old—it’s not like they make 30-40K a year where you can garnish their wages. With all types of insurance, the ideal scenario is to protect yourself by purchasing as much liability protection as you can afford. Typically, to get higher limits of #1 and #3, is not a lot of money. For example, you have 300K bodily injury and property damage liability (#1) and you get the same limit of SUM (#3). You’re riding down the road, someone pulls out in front of you, knocks you off the bike and injures you seriously. You sue the other driver, but they only have 25K. That’s not going to be enough for your medical bills and lost wages. What do you do? The uninsured motorist coverage means you can sue your own policy for bodily injury by taking the 300K, less the 25K the other driver has. That leaves you an aggregate of 275K to protect yourself, when a driver doesn’t take out adequate insurance. The Dept. of Motor Vehicles and the state only requires 25K for liability, clearly not enough. Since you are considered a pedestrian when riding a MC, the uninsured motorist (#3) is the most important coverage for you to buy. But it has to match, or cannot exceed liability coverage (#1).

 

            The same thing can be said for your car insurance policies. Some people might be surprised when you get your car insurance renewal. You may think you have a lot of liability, but you may not. It’s important to match your SUM (#3) to your bodily injury (#1), even on car insurance because the same example from above holds true. If you’re at a red light and some kid rear ends you, and someone breaks their shoulder or has damaged vertebrae, they are looking at neck surgery. When you go to sue that kid for 25K, that’s a pittance. If you have strong SUM (#3), it can be a huge benefit. 

 

            Q. If that happens in a car, can we go into no-fault?

            A. In regards to cars, the term no-fault/at fault accidents in New York State (a

            comparative negligence state) means after an accident, they can deem fault. 

            If I rear-end the car in front of me, I’m 100% at fault, the other vehicle is 0%. Some

            accident blame can be split, 50/50 or 60/40. After a car accident, if I’m driving

            down the road and even though I caused the accident, for anyone injured in my

            car, my personal injury protection or no-fault on my policy pays for injuries in my

            car only. In NYS, you can get from 50-175K no-fault. It’s a coverage that you can

            purchase in increments. The first 50K is the most expensive. To go up

            incrementally is peanuts, but worth it in gold. In NYS, when you’re on your MC,

            your no-fault coverage on the car is not going to protect you because you are not

            in you car. 

 

            The key point is to purchase as much liability (#1) and uninsured motorist (#3) as you can afford. If you compare what you have now, to what it would be to go up incrementally, it’s not a lot of money. Because you don’t want to find out after an accident how much coverage you don’t have. 

 

            Dakota’s comment—My misconception about the meaning of liability is that I would

            have to pay out if I did damage with my MC—and I was thinking, how many times

            does a MC cause that much damage and how often would someone come after

            me for this? So, let’s get the minimum. What I didn’t understand was the link the

            underinsured had to the liability—to protect me, so when the sucker hit me and he

            had 25K, that was it. My medical bills were 30K. Thank God I’ve got health

            insurance, which picked up the slack. But when I asked about my underinsurance

            because my expenses weren’t covered, I was told no way because he’s got 25 and

            I’ve got 25 and they cancelled each other out. If I’d had 100K, I could have gotten

            75K for other expenses.

 

            Q. Isn’t it better to get disability insurance?

            A. You’ll be surprised how expensive disability policies can be. A disability policy

            covers off the job injury and sickness. A disability policy would be great, but

            depending on the occupation, they can run from several hundred to several

             thousand dollars. And there aren’t a lot of insurance companies that will write

            disability policies. With disability and life insurance policies, the younger

            you are the lower the rates, because the companies figure you’re gong to live ‘X’

            amount of years. They are probably a lot more expensive than just spending an

            extra $50, $100 on MC insurance to protect you.

 

            Pedestrian Personal Injury Protection (PIP) (#4) on most policies, shows up as ‘personal injury protection.’ In an auto, PIP protects the driver and occupants of the car, regardless of fault. But, PIP on a MC policy only kicks in if you, as a driver of a MC, hit a pedestrian or someone on a bicycle (a bicycle, like a MC, is considered a pedestrian). PIP might show on your policy that it is intended for pedestrian personal injury protection. There is about 50K of automatic protection on every MC policy that helps you in case you hit a pedestrian. That coverage is not for you or your passenger if injured on a MC, it’s for striking someone. 

 

            Q. Wouldn’t that also be included under the bodily injury liability? (#1)

            A. If you do strike someone, whether it’s a pedestrian or someone in an auto, and

            the accident is your fault, then the limits on #1 are ultimately what’s going to

            protect you when you get sued. For example, you’re riding down the street and a

            kid on a bicycle comes in your way and you knock him off. If you have 25K liability

            and they hire a big law firm and sue you for 500K, you’re going to get nervous. 

            That is where #1 can protect you. Statistically speaking, those odds are a lot

            slimmer than someone pulling out in front of you. If you were to compare the

            bodily injury (#1) on your policy and you have 25 or 50K for coverage, the cost to

            have it go up to 300K is minimal because most MC accidents are not your fault. 

            It’s someone making a left hand turn in front of you, it’s the other drivers fault. 

            Because uninsured motorist (#3) gives you better protection, it is more expensive

            to go up incrementally than bodily injury (#1). Both of them are worthwhile. 

 

            Q. Is the pedestrian protection (#4) separate from bodily injury (#1)?

            A. Yes, it’s a separate clause. Ideally, what happens is that if you hit a pedestrian,

            the state hopes that by you having 50K coverage and getting the injured party the

            right medical help, sooner than later, they won’t have to tap into #1 because they

            wont sue you. Unfortunately, most people call their attorney before they call the

            doctor. But, that’s why it’s there, to protect the pedestrian in case they’re injured.

 

Comprehensive (#5), subject to a deductible, is fire, theft and vandalism protection. If you have a $500 deductible and the MC is stolen and it’s worth $5000, the company gives you a check for $4500. Depending upon the age and value of the MC, comprehensive may or may not be warranted. The 18-year-old who wants to get his first bike, a 1991 Honda 550, is not worried about it getting ripped off. He just wants liability (tell him to park next to a Harley). Comprehensive is not a mandatory coverage; it’s going to depend on the bike.

 

Collision (#6), subject to a deductible, is not mandatory coverage, but if someone has a loan out or a newer bike, comprehensive (#5) and collision (#6) are needed. This will help with repairs after an accident, regardless of fault.

 

            Umbrella coverage is layered liability, above the car and home insurance. It is good to do if you can do it, but most companies exclude MC from umbrella policies. 

            To recap, in New York State, the minimal coverage that you can have is 25K, up to 500K. The better your MC policy, the better protection you and your passenger have. We’re not at fault when someone pulls out in front of us and causes an accident. The driver and passenger on the MC will collect from the other party’s car insurance, up to their limit. Even though the accident is not your fault, the other party may have so little coverage that leaves you with additional expenses. The most important coverages are liability (#1) and supplemental uninsured (#3). The best thing for people to do when you get your renewals is to call your agent and have them explain the best coverage for your situation. 


 

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