What is Motorcycle Insurance?

You can go to the financial pages, or a library for a book that will tell you in great and confusing detail - but here's my simple description in everyday terms:

An insurance company is like a big, communal savings scheme. Everyone contributes into a big pot, in case someone needs to withdraw from it on a 'rainy day'.

For Example: At its most simple level all the players on a club football team could contribute $100 (premium) towards an end-of season jackpot (claim) for one player (could be unluckiest, injured or anything) - so there is say 15 times 100 =$1500 available for paying out (claim).
Now, lets say this season did not produce any really bad luck and the team only decided to pay $500 to Tom who broke his leg in the last game. This means that there is still $1000 in the pot - so to maintain the $1500 level, the team only needs to make up $500 next season, which makes each players contribution (premium) $500 divided by 15 = $33.33. So their premium has gone down.
But imagine Tom had broken his leg at the first game, and he had to sit out the season as well as miss work. The team did not think the $1500 went very far, so they might decide that the pot should be twice as big, in which case $3000 divided by 15 is $200 each.

This is a really simple explanation of how insurance companies work. Real Insurance companies have powerful financial models that are able to predict the risk of different extents of risk.

It's easy to understand that a young rider on a superbike who has already had a couple of wrecks and citations is more likely to claim than a rider who has ridden for 20 years without mishap.

Real Insurance Companies must follow government guidelines regarding business practices and also keep a big fund in reserve in case a lot of 'Tom's' crash in a short time.
In addition they have to pay their bills, employees and of course shareholders.

For young and learner riders, we have additional resources available to help you understand Motorcycle insurance. Check our list of Popular Motorcycle Insurance Company and Agents

Glossary of Motorcycle Insurance Terms