Bicycle Insurance

Bicycle Insurance

An increasing number of people are riding bicycles in the United States.  According to the League of American Bicyclists, bike use increased by 39 percent nationally between 2001 and 2011. Furthermore, in the country’s seventy largest cities, bicycle commuting has increased by 63 percent. There are plenty of reasons why the number of cyclists is growing in America. Riding a bike is healthy, it reduces spending on gas, it’s good for the environment, and it’s fun. So, what about bicycle insurance?

While cycling has lots of obvious benefits, there are a few inherent risks that go along with owning and riding a bike.  Some common concerns of cyclists include bicycle theft, getting hit by a car, collisions with pedestrians, collisions with other cyclists, and random accidents that don’t involve anyone else (e.g. getting a tire stuck in a trolley track).  Fortunately, there are number of good, traditional insurance policies that can help cyclists deal with these risks.  And because not all people who ride bikes have the full range of traditional insurance or coverage under their Home Insurance policy, there are new insurance policies being created specifically for cyclists.

This article will address several of unpleasant possible situations faced by bicycle riders.  In each section, you will find some available ways to insure yourself against each risk.  The end of the article covers the recent developments in the area of specialized bicycle insurance.

What if my bicycle is stolen, damaged, or vandalized?

According to the National Bike Registry, more than 1.5 million bicycles are stolen every year. Many bikes are stolen when they are simply left without being locked up by their owners.  But even a cyclist who uses an expensive bike lock can lose a bike to a thief that has the right lock-cutting tools.  With prices ranging from a few hundred dollars for a simple new bike to over ten thousands dollars for a top-of-the-line racing model, it is important to have some protection against the cost of bicycle theft.

Most homeowner’s and renter’s insurance policies will cover bicycles under the personal property category.  If you have homeowner’s or renter’s insurance, ask your agent how to make sure your bicycle is covered for theft, vandalism, fires or any other risks on your policy.

Almost all homeowner’s and renters insurance policies will require you to pay a deductible when you submit a claim before the company’s contribution kicks in.  The deductible can be a few hundred or over a thousand dollars. Of course, if you have a $500 deductible and someone steals your $200 bike, you won’t get any reimbursement from your insurance company. If you already have homeowner’s insurance, you should check with your insurance agent to see what your deductible is and compare that to your bike’s value. If the deductible is significantly lower than your bike’s value then you should make sure your policy covers potential theft of your bicycle.  You should also keep the purchase receipt for your bicycle and take pictures of the bicycle to document it for your homeowner’s policy.

Some homeowner’s insurance policies will pay the “actual cash value” of a stolen bike, while other policies provide for the “replacement cost” of the bike.  This is an important distinction to make when protecting your bike against theft.

Actual cash value is calculated by taking the original value of the bike (e.g. the purchase price) and subtracting the amount by which the bike has depreciated. For example, if someone steals a bike that you purchased five years ago for $3,000, the insurance company may tell you that the actual cash value of the bike is only $600 because of the five years of depreciation.  If your policy’s deductible is $500, then you will end up receiving $100 from the insurer on the claim (i.e. actual cash value minus deductible).

In contrast, a policy that provides replacement cost will reimburse you for the cost to replace the stolen bike with another bike of similar kind and quality at the current cost. Using the example above, if bike prices have gone down a little, it might cost $2,800 to buy a bike that is of similar kind and quality to the bike you bought five years ago for $3,000.  If your policy’s deductible is $500, you would end up receiving $2,300 from the insurance company to replace the stolen five-year old bike.  Replacement cost policies are typically more expensive than actual cash value policies.

What if I’m involved in a cycling accident?

Lots of kids fall off their bike or crash going over a curb at some point growing up, but that doesn’t stop most people from riding bikes.  As adults, we are generally more aware that we are not invincible, and so we tend to take the prospect of a bike accident a bit more seriously.

The National Highway Traffic Safety Administration (NHTSA) tracks the number of cyclist injuries and deaths resulting from traffic crashes.  The NHTSA’s most recent statistics are from 2011, a year in which there were approximately 48,000 cyclist injuries and 677 cyclist deaths.

Whatever your age, a bike accident can have serious consequences in terms of bodily injuries to yourself or others, medical bills, property damage, and legal liability.  It is extremely important to protect yourself with the right insurance so you can minimize the financial impact that an accident would have on you and your family.

Do You Have No-Fault Insurance?

A number of states require drivers to have something called No-Fault or Personal Injury Protection (PIP) insurance.  The system is sometimes called No-Fault because it is meant to eliminate the legal process (and associated time and expenses) involved when an accident victim has to to prove that it was the other driver’s fault to recover damages. Drivers in states with the No-Fault system are all required to have at least the state-prescribed minimum level of PIP insurance.  Because these drivers all have PIP coverage, as long as the costs are within their PIP limits, injured drivers can receive compensation from their own insurance company without a legal battle over whose fault the accident was.

If you have No-Fault or PIP coverage, and you are injured in a car accident while riding your bike, your insurance company should automatically reimburse you for medical bills (and possibly lost wages) up to your coverage limit. You may want to talk to your insurance agent about increasing your PIP coverage limit beyond the state minimum, which is usually not enough to cover the cost of more serious accidents.

Importantly for the present discussion, in many states and under most PIP insurance policies, this coverage will apply even if you were riding a bike and not driving your car.  The specifics of No-Fault laws and benefits vary from state to state, so be sure to speak with an insurance professional to see how it applies to you.

It should be noted that PIP coverage is typically only for accidents that involve cars.  This means that if you crash your bike into a fence, another cyclist, or a pedestrian, your PIP coverage would not help you.

Do you have Underinsured/Uninsured Motorist Protection?

Every state requires motorists to carry some minimum level of car insurance or something similar to demonstrate financial responsibility. The point of this insurance requirement is to make sure that anyone driving a motor vehicle has the ability to pay for some of the damages or injuries that they might cause and be liable for in a car accident.

If you are a cyclist and you’re hit by a car driver, hopefully the costs related to your injuries will be less than the coverage limits of the driver’s liability insurance. If the driver’s insurance limits are not enough to cover all of your costs and damages, that means the driver is underinsured. Fortunately, you can purchase underinsured motorist coverage as part of your car insurance to protect against this type of situation.

If you have car insurance that includes underinsured motorist protection, your insurance should help to cover the difference between the amount of your costs and the amount of the driver’s liability insurance coverage. Under most policies this underinsured motorist protection will apply to you even if you were riding your bike and not driving your car when you were hit – but you should double-check with your insurer.

Unfortunately, not every driver follows the law and some drive without even the legal minimum liability insurance. What if a cyclist is hit by a driver who has no insurance? If the cyclist has car insurance that includes uninsured motorist coverage, the cyclist’s insurance should help reimburse him/her for the covered costs up to the policy’s limits.

Purchasing underinsured/uninsured motorist protection from your car insurance provider is a good idea if you ride a bike – it’s also a smart idea even if you don’t ride a bike. Depending on your policy, underinsured/uninsured motorist protection may compensate you for medical bills, pain and suffering, lost wages (assuming you are too injured to work), emotional distress, or among other things. Check with you insurance company to see how much coverage you have and what it would cost to add more protection.

Do you have medical insurance?

If you have medical insurance, this should provide coverage for your medical bills after a bike accident. However, you medical insurance policy is more of a backstop for the other types of insurance listed above.  For instance, if you are in a state with a No-Fault system, and if you have PIP coverage, the medical insurance company will only probably only contribute toward your medical bills after the your PIP benefits have been exhausted. The medical insurer may also ask to be reimbursed for its payments if you receive compensation from another party’s insurer.  Talk to your medical insurance provider to find out exactly how this insurance would interact with other types of insurance in the event of a cycling accident.

What if I hit a pedestrian or another cyclist while riding my bike?

A liability policy will protect you if you cause a collision and injure another cyclist or pedestrian.  If you injure other people, they can sue you to cover the costs associated with their injuries.  You can also be sued if you cause damage to someone’s property while riding your bike (e.g. crashing through their fence).  The costs of a defending a lawsuit and paying a settlement can be very high.

Many homeowner’s or renter’s insurance policies include liability coverage for the policy-holder and members of their household. If you have liability coverage from a homeowner’s or renter’s insurance policy, your insurance company may help pay for the legal costs of defending a lawsuit and the cost of a settlement for the plaintiff.  Of course, the extent of your coverage will depend on the insurance policy you have.

Are there specialized bicycle insurance policies?

With the growing number of cyclists looking for insurance, a few companies are starting to come to market with insurance policies that are specifically created for cyclists.  This is a rapidly changing area of insurance, so you may want to speak with an independent insurance agent to find out what trustworthy options are currently available in your state.

A company called Spoke Insurance is now offering a few different bicycle insurance plans.  For instance, the Spoke Insurance comprehensive plan includes bicycle liability coverage, uninsured/underinsured motorist coverage, and medical payments.  See the company’s website or speak with an agent for up-to-date information on the cost of plans, deductibles, dollar amount limits for each type of coverage, and other important details. However, Spoke Insurance is currently only offering coverage in the following twelve states: CA, CO, AZ, NV, OR, ID, WA, UT, HI, TX, NY, and FL.

Markel provides insurance coverage options for several different recreational activities, now including cycling.  Depending on your needs and your budget, Markel’s bicycle insurance may be able to cover you for theft/vandalism, liability, medical payments, underinsured/uninsured motorist, and roadside assistance.

Another insurer, Balance Insurance, provides specialized insurance only for serious cycling accidents.  According to its website, Balance Insurance’s “bicycle accident insurance policy provides lump-sum cash benefits from $50,000 to $250,000 without regard to other insurance payments to which an injured cyclist may be entitled in the event of a covered accident. It is intended to help provide funds for the extraordinary expenses – both medical and non-medical – that are required to restructure and restore a seriously injured person’s personal and financial condition.”  If you are only worried about a worst-case-scenario type of accident, then this could be a good solution for you.

An indicative example of the evolving nature of the bicycle insurance market can be seen in recent developments with Better World Club.  Among other things, Better World Club has provided members with bicycle roadside assistance since 2003 – often described as similar to AAA for cyclists. In the summer of 2012, Better World Club announced that it was offering “the first nationwide, comprehensive, and affordable accident and liability insurance for bicyclists.”  However, the Better World Club’s bicycle insurance plan was no longer available as of the summer of 2013, apparently due to the insurance underwriter’s decision not to renew the policy.

It is unclear whether Better World Club will find another underwriter or if their insurance program will end with that one-year experiment. Until there is a more proven record of risk for this area of insurance, companies may continue to test the market with limited pilot programs.  Given the growing demand for comprehensive bicycle insurance, hopefully within the next few years some new market leaders will emerge to meet this demand across the country.

Conclusion

If you ride a bike and you are interested in protecting yourself with insurance, you have to consider:

  • A) the risks that you are concerned about

  • B) the types and amounts of insurance coverage you already have in place, and

  • C) any gaps that exist between A and B.

If you already have homeowner’s or renter’s insurance, you may already be covered for theft or damage to you bike.  If you are worried about the liability of hurting another cyclist or a pedestrian, your homeowner’s or renters insurance may also provide you with protection for that scenario.  And if you are mostly concerned about your own potential medical bills, you should check to see what protection you might already have within your car insurance policy and/or your medical insurance.

It doesn’t make financial sense to purchase redundant insurance from different providers.  But if there are any gaps between the protections you want and the protections you have, you should either change your policies’ coverage or look into one of the new specialized insurers. Improving your insurance protection will help you enjoy bicycling with greater peace of mind.

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