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By Steven M. Bialick, Attorney at Law, email: [email protected]

There are provisions in insurance policies that limit the amount of coverage that is available. This article discusses two examples of policy provisions you should watch out for.

Part 1- Underinsured Motorist Limits:

It’s usually a good idea to carry Underinsured Motorist coverage under your motorcycle insurance policy, if it’s available. The purpose of this coverage is to provide you with extra insurance if you’re injured in an accident and the policy limit of the liability insurance covering the at-fault driver isn’t enough to fully compensate you for your injuries.

However, you should make sure you know how your Underinsured Motorist policy limit works. Depending on the policy language and applicable state law, you might not be getting what you expect.

There are different ways Underinsured Motorist policy limits can work. One way is the “Add-On” limit. Under this type of provision, the full amount of the Underinsured Motorist policy limit is available in addition to the liability insurance policy limit covering the at-fault driver.

Other types of Underinsured Motorist policy limits are “Limits-Less-Paid” and “Difference-Of-Limits” provisions. Under these types of provisions, the Underinsured Motorist policy limit is reduced by the amount paid on behalf of the at-fault driver or by the limit of liability insurance covering the at-fault driver.

The following example illustrates how different types of policy limit provisions can result in strikingly different outcomes:

Jim has Underinsured Motorist coverage under his motorcycle policy, with a $50,000 per person policy limit. He suffers injuries worth $100,000, when he’s rear-ended by a driver who is covered by an insurance policy that has a $50,000 liability insurance policy limit. After going through the proper procedure, Jim collects the $50,000 liability policy limit from the insurance covering the at-fault driver.

If Jim’s Underinsured Motorist coverage has an “Add-On” limit, he can also collect the $50,000 Underinsured Motorist policy limit from his motorcycle insurance.

However, if Jim’s Underinsured Motorist coverage has an enforceable “Limits-Less-Paid” or “Difference-Of-Limits” limit, he would not be entitled to collect any Underinsured Motorist benefits in this example. The reason is that his $50,000 Underinsured Motorist policy limit would be reduced by the $50,000 policy limit he collected from the at-fault driver’s insurance coverage.

To further complicate matters, the laws in some states do not have the same requirements for Underinsured Motorist coverage on motorcycles as they do for Underinsured Motorist coverage on cars, trucks, and other types of vehicles.

If you have Underinsured Motorist coverage under your motorcycle insurance policy, you should see what the policy limits are for that coverage and how those limits work, so you can determine if any changes need to be made.

PART 2 - Liability Coverage " Drop-Down" Limits:

You should have liability insurance that covers you while driving your motorcycle. This type of insurance pays other people for injuries and damages they sustain as a result of an accident that is your fault.

Your insurance policy declaration page usually shows the limits for your liability coverage. However, the small print in your insurance policy might contain provisions that reduce your policy limits under some circumstances. An example of a policy provision you should watch out for is a “drop-down” policy exclusion that lowers your policy limit for injuries to a family member who lives with you.

The case of Babinski v. American Family Insurance Group, 569 F.3d 349 (8th cir. 2009) illustrates how a “drop-down” policy exclusion might work. In that case, a woman who was a passenger in a pick-up truck driven by her husband died as the result of an accident. The million-dollar liability limit of the insurance policy covering the husband was reduced to Minnesota’s minimum liability limit of $30,000, because of a household “drop-down” exclusion in the policy.

Nobody likes to think of the possibility of getting into an accident while driving their motorcycle. However, it is a good idea to check to see if the liability insurance coverage on your motorcycle drops down to a lower policy limit for a family member who is injured while riding as a passenger on your motorcycle. If it does, you should consider changing your motorcycle insurance.

Steven M. Bialick has been in the private practice of law since 1980. He practices in the areas of accident and personal injury law.

This article is intended to provide general information only, and is not legal advice or a legal opinion on any certain facts or circumstances. Readers are encouraged to consult with an attorney on any specific legal questions or matters.

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