Advantages and disadvantages of motorcycle gap insurance

Shawn | Mar 18, 2011 |

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Imagine that you just bought a new Suzuki GSK-RX1200 four months ago and it was stolen in five minutes while you were at shop and were just buying a juice.

You should not worry about it because you are covered by a full motorcycle gap insurance policy that your motorcycle lender asked you to get.

Am I wrong?

In the majority of cases it is not exactly like this, if you will look at the details of the motorcycle insurance policy you will realize. The main reason why the coverage insurance policies will pay for total loss such as accidents, theft or natural disaster is because these policies only cover the depreciated market value of the motorcycle not the outstanding value of it.

This is why when you buy insurance and zero payment motorcycle loans or maybe very low payments, then your Suzuki have depreciated faster than you paid the value of your motorcycle loan. Since the insurance will cover the depreciated market value of your motorcycle, you are responsible for the difference in the value which insurance company pays you for the stolen motorcycle. If a motorcycle is stolen, the buyers in the first two year are susceptible to not being reimbursed enough for their motorcycle insurance policy, to minimize the value of their motorcycle loan. So what should a motorcycle buyer do to protect himself against the value of motorcycle loan?

Answer lies in a not so known policy called gap insurance. The gap insurance is a total loss policy insurance that pays the difference of the amount of your motorcycle company insurance must pay you for a total loss and the value of your motorcycle loan.

The gap insurance though is not for everybody, it really depends on your financing arrangement. Here are three tips that will help you decide what kind of insurance you should get. An extended term insurance like 48-84 months is probably a great idea, the payment is low each month but if you are summarizing it then the sum will pretty big.

If you are buying a motorcycle that has a story of depreciating very fast then gap insurance is a great alternative for you. To know this, compare the depreciation rate of the motorcycle with the payment of the principal on your motorcycle loan. From there you will get an indication.

If you are buying a used motorcycle then it is not the best option to buy gap insurance because gap insurances are good to only brand new motorcycles.