Protecting Yourself With Motorcycle GAP Insurance

Author:

Imagine that you bought a brand-new Suzuki GSXR1000 motorcycle just two months ago and it was stolen while you were dining at your favorite restaurant. You are covered by the full coverage motorcycle insurance policy that your lender required. Right?

Most cases, it is not. However, you can review the details of your motorcycle insurance policy. Most full coverage motorcycle insurance policies cover total loss, such as theft, accident, or natural disaster. However, these policies usually only cover the motorcycle’s depreciated value and not your outstanding motorcycle loan.

Your Suzuki GSXR1000 could have appreciated faster than the motorcycle loan value if you opted to make a zero down motorcycle loan. Your motorcycle insurance policy will only cover the market value of your Suzuki GSXR1000. You are responsible for any difference between what the insurance company pays and what you owe on your motorcycle loans.

Motorcycle buyers who have been on a motorcycle loan for less than two years are most likely to be denied reimbursement from their insurance. What can a motorcycle buyer do to protect their motorcycle loan’s outstanding value?

ALSO READ  Things to Avoid When Purchasing Auto Insurance

Gap insurance is a policy that many motorcycle buyers are unaware of. Gap insurance, a total-loss insurance policy, will pay the difference between the amount your motorcycle insurer pays you for total damage to your bike and the value of your motorbike loan.

Let’s take an example. Let’s suppose your Suzuki GSXR1000 has a market value of $7500. Yet, you owe $9,000.50 on your motorcycle loan. Your motorcycle insurance policy will only cover the $7500 used market value in the event of total loss, such as theft, or an accident. You still owe $9500 to your motorcycle lender so there is a gap of $2,000 ($9500-$7500=$2000). Since your motorcycle insurance company paid $7500 for your Suzuki GSXR1000 stolen or damaged, gap insurance will cover the $2000 gap.

Gap insurance is available for all. It depends on the financing arrangement. These are some ways to decide if gap insurance is right.

1. A zero down motorcycle loan, especially for a long term such as 48-84 month gap insurance, is probably a good option. You might be better off not having gap coverage if you have a substantial down payment on your motorcycle loan.

ALSO READ  The Economy Never Stops Skilled Insurance Sales Professionals

2. Gap insurance may be a viable option if you’re looking for a motorcycle loan for a model that is known to depreciate very quickly. Compare the motorcycle’s depreciation rate with the principal amount on the motorcycle loan to determine the value of gap insurance. This will show you how much you’d be out of pocket if your motorcycle were stolen or damaged.

3. To ensure that your full coverage motorcycle insurance policy does not cover the difference between the motorcycle’s market value and your motorcycle loan, make sure you review all details. Only a small proportion of motorcycle insurance policies will cover the motorcycle’s value for the first year, without taking into account depreciation. You may not need gap insurance if your motorcycle insurance policy covers 100% without depreciation.

4. Do you plan to purchase a used motorcycle? You won’t be able to buy gap insurance if you are buying a used motorcycle. Most gap insurance policies only cover new bikes. It is recommended that used motorcycle buyers make a large down payment and pay off the loans as soon as possible.

ALSO READ  Thing You Should Keep in Mind Before Investing in Real Estate

5. How much does a gap insurance policy cost? Is this a benefit that is worth the cost?

The financing situation of a motorcycle buyer buying it with a loan can determine if gap insurance is a good option. Each motorcycle buyer is unique, so the five factors above can help you decide if gap insurance is right for you.