What I'm Learning About Insurance - Part 1

As part of trying to get this whole mess worked out with the insurance companies (mine and theirs), we've decided to hire a lawyer. Under the tutelage of these professionals I've been learning a lot about how insurance works. If you're like me, when it came time to buy insurance for your car, you walked away from the experience not entirely sure if you understood what happened. Thanks to this experience, that ignorance has been largely erased.

When I bought insurance for my motorcycle, I actually bought multiple policies all at the same time and I bet you did too. Most of these policies are kind of self-explanatory and in my case, I ended up with four policies. We'll look at the two easiest first and I'll cover the more complicated ones in another post.

1. Collision - This is the easiest to understand, kind of.  By buying this policy, my insurance company agreed to pay to repair the damage caused to my motorcycle in the event of a collision. These policies often have a deductible which is the amount the I must pay for repairs before the policy kicks in and covers the rest. For example, if a collision results in $750 of damage and I have a $250 deductible, I pay the first $250 and the insurance company pays the other $500.
   
   There is a slightly abnormal case that can arise with this policy. In the event that my motorcycle is not worth very much (age, mileage, style, etc) and the cost of repairs exceeds the value of my motorcycle, the insurance company can, rather than repair my motorcycle, choose to declare it a complete loss.  This is called "totaling" the vehicle.  In this case, I still pay the deductible and then the insurance company writes me a check for the current market value of my motorcycle.
   
   Additionally, in the event my motorcycle is declared totaled, the insurance company may offer to sell it back to me. Some people might be interested in this option if they have the time and ability to make the repairs themselves, sell the car, or sell parts from the car.  Here in Kansas, cars are often totaled due to dented roofs and hoods caused by hail storms. Since these dents don't affect the functionality of the car, it makes sense for the owners to buy them back after being totaled.
   
   In my case, my motorcycle ended up with a $3000 repair bill for a motorcycle worth $1500. The insurance company declared it totaled and offered to sell it back to me for $400. I declined, paid my $100 deductible, signed over the deed to them and got a $1400 check.
   
   
2. Personal Injury Protection (PIP) - In the event of a collision that injures the policy holder, PIP steps in and acts as mini health insurance and supplemental insurance rolled into one. In Kansas, the minimum coverage for medical bills is $4500, which, is not much given the cost of medical care today. If you end up taking an ambulnce ride, this minimum coverage isn't going to go very far. For most people, traditional health insurance will end up covering most of the cost of medical care.
   
   The supplemental insurance is the more interesting aspect of this policy. In the event that an injury causes you to miss work, this policy will pay up to a certain amount for a certain period of time. Similarly, if the injury prevents you from doing household chores, this policy will give you a small amount each day to pay others to fill in for you.
   
   In Kansas, this policy is optional for motorcycle riders as the cost is often prohibitive; it is required for other vehicles. A motorcycle rider friend of mine advocated that I drop this coverage as I had health insurance through to cover medical bills. This thinking ignores the benefits of supplemental coverage and I'm glad I didn't heed this advice.

Next up, I share what I've learned about liability and uninsured/underinsured.