Motorcycle Gap Insurance: Protection Against A Total Loss

Motorcycle gap insurance is an additional motorcycle insurance policy that pays the difference between what your regular motorcycle insurance pays in the event of a total loss, and the total value of your motorcycle loan.

Gap Insurance in Layman's Terms

Let's suppose you bought a brand-new, $11,000 motorcycle six months ago. Due to depreciation, that motorcycle is now worth $9,000. You got a zero-down motorcycle loan, so you still owe $11,000 on the loan.

Now let's suppose you are really unlucky and, after only six months of ownership, you total wreck your motorcycle or it is stolen (either is considered a "total loss"). In this case, your insurance company will only pay the depreciated value of your motorcycle ($9,000). If you have motorcycle gap insurance, however, it will cover the "gap" you still owe on your motorcycle loan ($2,000). Without motorcycle gap insurance, you would have to come up with the extra $2,000 yourself.

Do I Need It?

You should only consider motorcycle gap insurance if:
  • the type of motorcycle you purchased has a history of rapid depreciation\
  • your motorcycle is new (generally, you cannot purchase gap insurance for used bikes)
  • your regular motorcycle insurance policy does not cover the difference between the market value of your motorcycle and the value of your loan
  • you have an extended term (24-48 month), zero-down payment loan. If you paid a large sum upfront, purchasing gap insurance would not be cost-effective
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