Making the Deductible vs Premium Calculation Work For You When You Buy Motorcycle Insurance
I know, you keep seeing that ad where the Progressive Redhead rides onto the set, pulls off her motorcycle helmet and reveals perfect hair.
That’s surely enough to make you question whether or not you did the right thing when you chose which company would sell you your motorcycle insurance. I mean, you want perfect hair, right?
Okay, so you don’t really care about perfect hair and you didn’t get the itch to review your policy, but maybe you should. When you do, you face a whole flotilla of pitches when it does come time to buy insurance for your bike. How are you going to navigate that Armada?
You’re going to do the one thing you hate to do more than listening to Kenny G; you’re going shopping, my friend.
If you want to save a bunch of Benjamins and make sure you have the kind of coverage you need, you’ll have to research the various deals and products that all the insurance providers have on offer. Let’s face it, money is money and keeping as much of it as possible in your pocket is the Platonic ideal.
My wife does not agree, and leans toward the medical coverage aspects of buying insurance, but I think choosing how much to pay for your deductible is the major decision you’re going to have to make. To make it, you have to carefully calculate what you have to lose if you’re in an accident before you set that deductible.
The amount you set as your deductible is directly related to the amount of financial risk you’re willing to take on in a worst case accident scenario. It’s real simple; the lower you set your deductible, the less risk you’re assuming should everything take a turn for the worst.
It’s a reasonably simple equation you’re dealing with here made up of two major components:
- Step one: determine how much money do you might generally have on hand to make any repairs if your bike is damaged. If you’re always short of cash, you need to pay more every month to get a lower deductible.
- Step two: Make sure that whatever level of deductible you choose doesn’t have an outrageous effect on the monthly cost of your policy. If the money you’d have to put up for that lowered deductible ends up costing you a pile of cash over the life of your policy, you’ve made the wrong choice.
We suggest going with the higher premium with a lower deductible over time, but only if you don’t ride an incredibly expensive bike – or ride it like you’re Steve McQueen.
Just to make it all a little clearer, an insurance policy’s premium is the amount you have to pay per month or in total for the policy. The premium is the amount you pay to keep the policy in force.
The amount you set as your deductible is directly related to the amount of financial risk you’re willing to take on in a worst case accident scenario
The deductible is the amount you‘ll have to pay on any claim before your policy kicks in and starts paying for damages. Say you insurance policy has a $250 deductible. If you drop your bike in the parking lot and the repairs will cost $600, you’ll hand over the first $250 of that to the Harley Dealer, and then your insurance policy covers the rest. Have another beer-fueled-drop-your-bike-in-the-lot incident a month later? Then be prepared to pay the first $250 of the cost of the repair once again. It will be painful, granted, but not as painful as listening to your buddies recount your lack of skills.
The bottom line is this; unless you’re particularly accident prone, do the smart thing and carry a policy with a fairly steep deductible. Doubling or tripling the deductible might net you 20% to 25% in savings over the year of the policy, and as you can imagine, that adds up fast if you stay upright.
Remember that insurance is meant to cover really big financial losses and not every little dent and ding. If you make too many claims, insurance companies have a tendency to raise your premiums or drop you altogether as a customer, so don’t abuse the intent of your insurance and save claims for when you really, really need them.
That said, if you just bought a Brough Superior at auction for $575,000, then ignore everything you’ve just read. Go with all the coverage you can get your hands on and pay whatever deductible prevents you from gagging.
Buying motorcycle insurance involves some calculations if you’re going to get the best deal, and your insurance needs can get complicated.