When buying your motorcycle insurance, you want to carry a policy that is perfect for you in case you have a wreck. However, you also want to have a policy that is affordable. Usually, when you buy more coverage, you will have to pay more for your coverage. However, you still need to be able to afford the policy to begin with. Increasing your physical damage insurance deductibles might actually help you save, and here’s why.
The deductibles on your policy can be used as savings incentives. However, you should only take this plunge in the appropriate situations. Arbitrarily raising your deductibles might wind up being the wrong step, so you need to make an informed decision with the help of your agent.
Physical Damage Insurance
Most motorcycle insurance policies offer you the option of buying physical damage insurance. Policies usually contain two types of such coverage:
- Collision insurance will pay for damage to your bike following a wreck, or even following a collision with a pothole.
- Comprehensive insurance pays for your bike’s damage following mishaps not related to wrecks. Policies might cover storm, theft, fire and damage related to hitting an animal.
Your policy might pay you either the full replacement cost value of the vehicle, or the actual cash value, which is the bike’s depreciated value at the time of the accident. However, in most cases, the policy will pay you a settlement minus the cost of the deductible on each type of coverage.
The Deductibles Within Coverage
A deductible is a portion of the bike’s repair or replacement costs you agree to pay yourself. Therefore, if you have a $500 deductible, and $3,000 in vehicle damage, your policy will pay you $2,500, since $3,000 - $500 = $2,500.
As you increase your deductible, that means you agree to pay a higher portion of the claim cost yourself. So, suppose you have a $1,000 deductible on that $3,000 in damage. Your insurer will agree to only pay you $2,000 in case of a claim.
By increasing your deductible (such as going from $500 to $1,000) you’ll agree to pay more for a claim, and therefore reduce how much your insurer agrees to pay. Therefore, your become less of a cost risk to the insurer, and they might be able to offer you a lower overall premium.
Why You Should Be Careful
You should not increase your deductible without carefully thinking about how much you are willing or able to pay for a claim. The higher your deductible, the more you’ll have to pay. Also, if any claim cost falls below the deductible cost, then your insurer won’t pay at all. That might create more situations where you have to have to pay out-of-pocket anyway.
So, if you can afford a $500 deductible, but not a $1,000 deductible, you should choose the $500 deductible. It’s usually a lot easier to choose a deductible that’s lower, and pay a bit more for your premium, than to have one that’s too high just to save a few dollars. Let your agent explain to you the exact perks of this course of action.
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