Make Lots of Money?
MAKE LOTS OF MONEY?
Should you be so lucky as to have the problem, here are a few wrinkles to insuring your bike that apply if you are in a high tax bracket. First, anyone who makes more than $30,000 a year probably has considerable assets to protect. Liability on motorcycles (and four wheeled vehicles as well) should be pegged considerably higher than minimums. Bank of America’s mavens recommend $500,000 liability for people in the $30,000-plus area, and $ 1 million for families with $50,000-plus annual income.
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Yes, your real assets may be only a few thousand dollars, because your home is paid for with paper and your bike is worth less than the payments owed on it. But, a successful personal injury suit against you stands a good chance these days of reaching the quarter-million mark.
If the judgment exceeds the limit of your insurance, the court goes after your assets and may order liquidation. Remember how many years it took to build a net worth of just a few thousand dollars?
The extra cost of half million dollar liability limits is not much, often no more than $5 to $10 over the more conventional liability levels. And if you’re that lucky wheelie person in the $50,000 bracket, you can add a $ 1 million liability umbrella over and above your auto, bike and homeowner policies for an additional $55 to $100 per year. Our agent friend at Farmers Insurance Exchange adds that most insurers require the policyholder to have established minimum consistent liability limits on bike, auto and homeowner policies— usually in the $250,000 to $500,000 rangebefore they’ll add the $ 1 million umbrella.
Mind boggling, isn’t it? But if you’re a successful motorcycle dude like Preston Petty or Craig Vetter, y’ought’a get it done.
If you want to cut a few corners, it may be possible to do so on the collision portion of either your bike policy or your automotive policy. In some cases, you simply may eliminate the collision—if you own the machine outright and it is not encumbered as collateral for a bank loan.
The most logical time to consider cutting corners on collision insurance is after three years of ownership, whether it is a motorcycle, truck or car. Depreciation has taken its toll, and chances are you’ve paid off the loan.
While on dirt bikes, you can buy an RV liability and comprehensive policy with no collision, the problem with street bikes is that some insurance carriers are reluctant to carry you on a liability-only basis. Where it’s possible, elimination of collision insurance may save 25 to 50 percent of the premium. The other bike problem is that you may not cut corners on collision deductibles; most insurance companies are inflexible on the amount of deductible allowed on a collision policy. The reason is sound: The cost savings to you would not be significant and the policy is less profitable to the insurer.
But you can save money by raising the deductible limits of collision on your automobile or truck. Most people are habituated to $50 and $ 100 deductibles, but, with the doubling and tripling of automotive prices over the last decade, insurance practice has not fully followed suit.
A 1977 Chevrolet insured in a New York town, for instance, costs $80 less to insure for collision if the deductbile is $250 instead of $50. Since the odds of having an accident are roughly 5 percent to 40 percent per year, depending on how risky a fellow you are, you can calculate the crossover point at which having $50 deductible becomes folly.
A similar situation exists with comprehensive deductibles. Raise ’em to lower your cost.
We ran across even another angle in The Wall Street Journal (March 28, 1977) of interest to people with high taxable incomes. Losses over $100 from theft or collision of motorcycles and cars both that are not insured are tax deductible as a casualty loss. If your tax bracket is high, say, 30 percent, a $4000 casualty loss deduction is worth $1200 in cash back from the Feds when you file a return.
There is a point, theoretically, where your tax bracket—and the collision premium—is so high that it becomes cheaper not to buy collision. At that point, you are in effect insuring yourself. For most of us, the theory would apply to a fancy bikecarrying vehicle rather than the bike.
Whether you’re in a high or low tax bracket, it won’t hurt to look into the deductibles you’re now carrying. The savings may pay for that new set of shocks you wanted.
