You May Need Motorcycle GAP Insurance If You Owe Money On Your Bike
Sales of motorcycles have increased dramatically in recent years. There have also been an increase in motorcycle loss due to accident, theft, or natural disaster. Economically, a motorcycle is a wonderful investment due to decreased fuel expenses. However, as with any vehicle, as soon as it is driven off the sales floor, it depreciates in value, and the unsuspecting consumer may have been put into the precarious situation of covering the difference between the market value of the motorcycle and what is actually owed to the finance company.
If a driver experiences total loss of their motorcycle due to any unfortunate event, most insurance companies will only pay the market value of the motorcycle. For example, if a bike is financed at 0% down for $14,000 and a total loss occurs, the insurance company will pay only what the bike would have sold for on the open market. Since the bike depreciates as soon as driven off the lot, it has already decreased in value. Assuming that the market value is $11,000, the owner is responsible for paying the finance company the $3,000 difference that is still owed on the bike. This is where specialty insurance becomes very valuable to drivers. Motorcycle GAP insurance can help mitigate this risk.
Guaranteed Asset Protection or motorcycle GAP insurance is valuable coverage that a driver can purchase in addition to the regular insurance policy. This extra insurance covers any amount above and beyond what the traditional policy pays. However, not every driver needs this extra coverage, and consumers must evaluate their individual situation carefully before deciding whether or not the insurance in necessary. For example, if a down payment was made on the motorcycle, it difference between what is owed and the market value might already be covered.
Additionally, by carefully inspecting their insurance policy, many drivers might find that there is 100% coverage for total loss of the their bike, and extra coverage is not needed. Since this type of insurance can only be acquired for a new motorcycle purchases, it is important to keep this in mind when shopping for a bike. Another aspect to consider is whether the value of the motorcycle is less than the yearly cost of the additional insurance. If costs outweigh benefits, then the extra coverage would be an unwise financial decision.
More consumers are driving motorcycles as an economical transportation solution without realizing there is another aspect that should be considered in owning a bike. Ultimately, every driver must be aware of their own situation and know if they can financially afford to cover difference between the market value of the motorcycle and what is owed to the finance company. This is a risk that not many consumers are willing or ready to take.
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