Motorcycle Insurance: The Hidden Cost of Premium Savings
The majority of motorcycle riders view their motorcycle as a recreational vehicle rather than as their primary source of conveyance. Most riders use their bikes in addition to a car, truck, or other passenger vehicle that serves as their primary vehicle. Motorcycle use in Pennsylvania is generally limited to 6-7 months out the year, weather permitting. Because of the comparatively limited use of a motorcycle, riders may be tempted to purchase the minimum insurance coverage possible in order to save money on premiums. What you save, however, is a pittance compared to what you might give up.
Most insurance companies will not insure a motorcycle on the same policy as cars, trucks, or other types of passenger vehicles. Motorcycle policies are usually stand alone policies separate from your other household vehicles, even if the same insurance company insures all of your vehicles. It is also very common for riders to insure their motorcycle with a different insurance company than their cars because certain carriers have much lower rates for motorcycle insurance. All of this means that your motorcycle is usually by itself on a single vehicle policy. Because your motorcycle is on its own policy, you may be limited to the coverage on that policy if you are injured in an accident while riding your motorcycle.
The majority of Pennsylvania insurance policies are issued with an exclusion in the policy language that prevents policyholders from accessing coverage on other policies in the household when they are injured in a vehicle insured on a different policy within the household. This is referred to as the “household exclusion.” It is best understood through an example:
Henry owns one car, which he insures on a policy with Premium Insurance. His car policy has all of the coverages available under Pennsylvania law, including underinsured and uninsured motorist coverage. Henry buys a motorcycle and asks his agent to have Premium insure it. To insure the motorcycle with Premium, it will cost more money than Henry wants to pay. His agent suggests to Henry that he use Cheap Insurance to insure his motorcycle. Henry buys a policy with Cheap Insurance and selects on the minimum amounts of coverage required by law. He rejects underinsured and uninsured motorist coverage, believing that his policy with Premium will cover him for those coverages while he is on his motorcycle. His agent explained to him when he bought the policy that the Premium policy would cover him even if he wasn’t in his car. Henry believes he is covered while riding his motorcycle. Why would the policy cover him while he is any other vehicle but not on his own motorcycle? Henry is injured by an uninsured driver while riding his motorcycle. He makes a claim to Cheap Insurance, who tells him that he did not purchase that coverage. He makes a claim to Premium, who tells him that while ordinarily they would cover him while he was occupying a vehicle other than his car, because he owns the motorcycle the he was riding, his Premium policy will not apply because of the household exclusion. Henry is left without any coverage available to him to pay for his injuries.
Unfortunately, the example set forth above reflects the general state of the law in Pennsylvania. Had Henry been riding a friend’s motorcycle, rather than his own, his Premium policy would have provided him with coverage for injuries he suffered in an accident while riding his friend’s motorcycle. Because Henry owned and insured his own motorcycle on a different policy than his car, the household exclusion in his Premium policy prevented him from accessing the coverage available under that policy. While this may seem arbitrary, and unfair, the Pennsylvania appellate courts have upheld the household exclusion in Pennsylvania. It applies to cars as well as motorcycles. If you have more than one vehicle in your household, and those vehicles are insured on different policies, the household exclusion may preclude you from accessing the coverage under all of the household vehicles if you are injured while occupying one of the household vehicles. If the vehicles are insured on different policies with different insurance carriers, the likelihood of the household exclusion applying to limit your coverage is even greater.
The question becomes — How do motorcycle riders protect themselves while on their motorcycles? If you have multiple cars in your household, the easiest way to avoid the household exclusion is to insure all of your cars on one policy with the same insurance carrier and choose to “stack” your coverages. This does not work for motorcycles, however. Your car insurance company will not insure your motorcycle on the same policy as your car, and it may be prohibitively expensive to insure your motorcycle with the same company as your car. You, as one consumer, don’t have the bargaining power to negotiate the household exclusion out of your own individual policy, and the Pennsylvania legislature and courts have already approved this practice by insurance companies.
The only thing left for motorcycle riders to do to protect themselves is to purchase as much coverage as they can afford on their motorcycle policy. The only policy guaranteed to apply to you while you are on your motorcycle is the policy that insures your motorcycle. While it may be tempting to save money on your motorcycle insurance premiums, the coverage you give up in order to save that money is usually the most important coverage for you.
You are required by law to carry liability coverage, but that coverage only protects other people that you injure if you cause an accident. While this coverage is important, it will not pay anything to you if you are injured by another driver. Your primary source of coverage if you are injured by another driver is the liability insurance on the at fault vehicle. The required coverage in Pennsylvania is only $15,000 per person/$30,000 per occurrence. This means that the other driver, if they even have insurance, may only have $15,000 total to compensate you. This includes payment for your medical bills, lost wages, out of pocket expenses, pain and suffering, etc. Because of the nature motorcycles, the injuries to the motorcyclist can be very severe, even in a relatively minor collision. Right now, the cost of a single medical helicopter ride is usually $12,000-$15,000 or more. An overnight stay in the hospital can cost tens of thousands of dollars. Surgery to repair a broken bone can cost $50,000 or more. If you do not have health insurance that will pay for these medical expenses, the cost falls to you. Even though you did not cause the accident, the medical bills are your responsibility under the law. The hospital will not seek payment from the person who caused the accident, or from their insurance company. If the person who caused the accident had only minimum coverage, or no coverage at all, it is likely that money will go entirely toward medical bills, leaving nothing for you for your personal losses.
The only way you can protect yourself in the event of an accident is by purchasing underinsured and uninsured motorist coverage on your motorcycle policy. Underinsured motorist coverage will pay you if the person who causes the accident does not have enough insurance to pay for all of your losses and damages. Uninsured motorist coverage will pay you if the person who causes the accident has no insurance coverage. Your insurance company is required, by law, to sell you these coverages up to the amount of the liability coverage you purchase on your motorcycle policy.
You should not rely on the other driver to have sufficient coverage to pay for your injuries. Protect yourself, and your passengers, by purchasing as much coverage as you can afford on your motorcycle. KM&A recommends purchasing, at a minimum, the following coverages for your motorcycle:
Liability – $100,000 per person/$300,000 per occurrence
Underinsured Motorist Coverage – $100,000 per person/$300,000 per occurrence, stacked
Uninsured Motorist Coverage – $100,000 per person/$300,000 per occurrence, stacked
If you have more than one motorcycle, insure them on the same policy whenever possible, and always carry stacked underinsured and uninsured motorist coverage.