How Does an Insurance Policy Work?

An insurance policy is a legal contract between you and an insurance company. You pay a premium to the company in exchange for the insurance company's promise to pay for your covered losses. There is an expectation of good faith, i.e., that you and the insurance company will be fair and honest in your dealings with one another. Insurance coverage for off-road recreational vehicles is basically the same as other insurance, except that there are a number of different ways to insure them:

  • Obtaining coverage through a stand-alone insurance policy for specific types of off-road recreational vehicles, such as snowmobile insurance;
  • Obtaining coverage as an endorsement to an already issued policy, including for example, private passenger automobile coverage; and,
  • Obtaining coverage as part of an all-encompassing personal inland marine policy.

In all cases, you should work with your insurance producer to search for the coverage that is designed for your particular needs.

How Do I Obtain Coverage for an Off-Road Recreational Vehicle? Can I Be Turned Down?

You should know that insurance for your off-road recreational vehicle is offered in a competitive market. You can shop around for coverage from agents and companies available in your area. Please note that an insurance company can decide to turn down your application for coverage.

In order to obtain an insurance policy for your off-road recreational vehicle, you must fill out an application to help the insurance company learn about you, your assets, and the risks the insurance company would be responsible for if they insure you. After reviewing the information, the insurance company will use its own standards, known as underwriting guidelines, to decide whether to issue you a policy, and the rate it would charge for the coverage.

If an insurer agrees to consider your application, the producer or company may issue you an "insurance binder", a legally binding statement indicating that you have immediate protection for a specified period of time during which the company will decide whether to issue you a policy. If the company formally accepts your application, it will issue a policy, usually covering a one year period. If your application is rejected, you will need to apply to another insurer.

Can an Insurer Ever Cancel or Non-renew My Coverage?

Yes, an insurer can cancel or non-renew your coverage. You should read your policy carefully to determine the conditions for cancellation and non-renewal. Companies can cancel or non-renew coverage, but only according to the conditions that are spelled out within the policy. If a company ever intends to cancel or non-renew coverage, it is to give you advanced written notice of cancellation or non-renewal and indicate the reasons for cancellation or non-renewal.

How Do I Find Companies that May Sell Me Insurance?

Licensed Insurance Companies:

There are many insurers licensed by the Division of Insurance that sell property and casualty policies in the Commonwealth of Massachusetts. In order to be licensed, an insurer must demonstrate it meets the state's minimum financial requirements to pay claims now and in the future. It must also agree to participate in the state's guaranty fund designed to protect policyholders if any licensed property and casualty insurance company is financially unable to pay its claims. You can check here for a list of companies in your area.

When considering a company, you may want to contact your neighbors, relatives, and friends for recommendations regarding their insurance company's service and price. In addition, for a fee, you can learn more about the financial strength of a particular insurance company by contacting any of the following insurance rating services:

A.M. Best Company(908) 439-2200
Duff & Phelps, LLC(212) 450-2800
Fitch Ratings(212) 908-0500
Moody's Investors Services(212) 553-1658
Standard & Poor's(877) 299-2569
Weiss Research Inc.(800) 289-9222

What Type of Coverage Do I Need to Protect My Off-Road Recreational Vehicle?

You should consider a property coverage limit that is high enough to help you replace or repair your off-road recreational vehicle at today's labor and material costs. This cost may be very different from the market value of your off-road recreational vehicle.

In addition to choosing the type and overall limits to your coverage, you will choose a deductible level. This level will be the amount you will be expected to pay for covered losses before the insurer pays for claims. The higher the deductible that you choose - and greater proportion of low-dollar claims that are yours and not the insurer's responsibility - the lower the premium that you will have to pay.

Basic Coverages Available

There are differing packages of insurance that may be offered to protect your off-road recreational vehicle. It is important to know which risks a policy covers and which risks are excluded. Each policy protects against a specific number of perils (events that cause damage to property), including, for example, collision, fire, windstorm, theft, lightning or vandalism.

In addition to knowing the risks or perils covered, it is important to consider the expenses that are covered in the event of a covered peril. Each policy usually contains coverage for the following:

  • Property damage to your off-road recreational vehicle
  • Personal liability lawsuits
  • Limited medical payments for certain accidents arising out of your use of the off-road recreational vehicle
  1. Property Damage

    Typically an off-road recreational vehicle owner's policy includes coverage for damage to the off-road recreational vehicle and its parts, as well as the equipment used to transport the off-road recreational vehicle. The coverage also can include equipment that is permanently attached to the off-road recreational vehicle, including for example, fuel tanks, motors, horns, lights, or two-way radios.

    Typically, such a policy does not include coverage for personal property, including clothing, food, jewelry, or portable gear. It also does not typically provide any coverage for damage to your vehicle when it is operating in an official race or speed contest.
  2. Personal Liability Coverage

    Most off-road recreational vehicle insurance policies include personal liability coverage that protects you against any claim or lawsuit alleging bodily injury or property damage to others arising out of your ownership, maintenance or use of the off-road recreational vehicle. Since the personal liability coverage limits differ among companies and a company may add certain company-specific exclusions, you should read your policy carefully. You should also check to determine what limit is appropriate for you.
  3. Medical Payments Coverage

    Medical payments coverage pays for any medical expenses incurred by persons not living with you who are accidentally injured while in, upon, boarding or leaving your off-road recreational vehicle. Although the medical payments coverage limit is usually set at a low dollar amount, you may wish to check with your producer or insurance company to determine if the amount of medical payments coverage on your policy is sufficient, or whether a higher limit would be more appropriate for you. [You should know that this is intended for minor injuries; all other injuries caused by you may be insured under the personal liability coverage.]
  4. Uninsured Off-Road Recreational Vehicle Owners Coverage

    If purchased, this provides coverage for injuries resulting from an accident that is the fault of an uninsured off-road recreational vehicle owner or "hit and run" operator.
  5. Personal Effects Coverage

    If purchased, this may provide coverage for your clothing, portable radios or other personal items.

What Is My Off-Road Recreational Vehicle's Value Under An Insurance Policy?

Your off-road recreational vehicle's value can be looked at in three very different ways:
" Market value - represents what your property would sell for on the off-road recreational vehicle market.
" Actual cash value - represents what your off-road recreational vehicle is worth today after adjusting for the normal wear and tear that may have reduced the value of the off-road recreational vehicle.
" Replacement cost value - represents the cost that it may take to replace or repair your off-road recreational vehicle if it were destroyed or damaged.

Each of these may be significantly different than the other and should not be confused in determining the amount of coverage that you may need to repair or rebuild your off-road recreational vehicle. An off-road recreational vehicle that you bought for $20,000 may actually cost $30,000 to replace. Some policies will pay for the cost of replacement (either the cost to repair or replace the vehicle); others may offer actual cash value; and others may use an "agreed value" negotiated by both parties when the policy is issued. When considering the limits of your coverage, you should talk with your producer about how much it may cost to replace your off-road recreational vehicle.
If your coverage is for less than the replacement cost, your insurance company is not obligated to pay all the costs of the repairs. In the case of a total loss, the company will pay the lesser of the cost to repair the vehicle or the policy limits. For partial losses, an insurance company may only be obligated to pay a percentage of the loss based the percentage that your policy limit would pay toward the cost to replace your off-road recreational vehicle.

What May Affect the Cost of Insurance for My Off-Road Recreational Vehicle?

Amount of Coverage: The amount of coverage you buy will affect the price you pay.
Deductible Amount: This is the amount that you would choose under the policy that you would pay for a covered loss before the insurance company will pay any losses. The higher the deductible, the lower the price for the insured. You should keep in mind, however, that deductibles apply separately to each loss that may occur throughout the year.
Age and Condition of Off-Road Recreational Vehicle: New or remodeled off-road recreational vehicles may have certain safety features to reduce risk while older off-road recreational vehicles may be subject to more damage in case of an accidental event.
History of Accidents: If you have a history of off-road recreational vehicle accidents, this may be used as a factor in setting your rates, based on the likelihood of your having future accidents.
Discounts: Most insurance companies offer a variety of discounts, including some of the following based upon projected reduced risks for certain features including:
" Multi-policy discounts for covering off-road recreational vehicle insurance and other insurance with same carrier;
" Safety equipment discounts for equipment that may be part of the vehicle
" Training discounts for taking safety courses sponsored by snowmobiling or off-road vehicle associations

How Much Will It Cost to Insure My Off-Road Recreational Vehicle?

When you shop for insurance for your off-road recreational vehicle, it is useful to obtain premium quotations to compare different companies' products. However, when you ask for price quotations, it is important that you give the same information to each producer or company.
To give you an accurate quote, the producer or company will usually ask for the following: ?
" A description of your off-road recreational vehicle;
" If you have security devices;
" A picture of your off-road recreational vehicle;
" The coverages and limits you want; and
" Any prior property or liability losses.
How Do Insurers Market Insurance Policies?
Insurance companies generally use one of three methods to market their product: direct marketing, independent producers, or exclusive producers. The type of marketing method may or may not meet your needs, depending on the type of services offered. Therefore, you should be aware of each of the three methods and may want to consider these when you decide to buy insurance.
Some insurance companies use direct marketers who sell insurance through the mail and by telephone. Some insurance companies sell coverage through producers that only represent their company. These companies call their producers an exclusive agency force.
If you decide to call producers for prices, ask them how many companies they represent. Independent producers represent several companies; therefore, you can get quotes for more than one company from just one producer. Many consumers consider this an advantage.