Motorcycle is Stolen: Does Your GAP Insurance Cover It?

GAP is an acronym. It stands for “guaranteed automobile protection.” Although the terminology refers to cars, it applies to everything from trucks to motorcycles.

GAP insurance is meant to cover the remaining equity that occurs when a motorcycle experiences a total loss while the owner is still underwater on loan.

A motorcycle can depreciate up to 20% once it is driven away from the dealership. That means a $20,000 bike is suddenly worth $16,000. If you financed the entire purchase and it was totaled, you’d have a $4,000 loss when replacing it.

If you purchase GAP insurance, it covers or makes up the loan balance difference of the motorcycle’s value if theft or an accident occurs. Many policies base their rate on 125% of the MSRP of the make and model purchased.

What Is a GAP Insurance Coverage Cap?

GAP insurance coverage caps are meant to lessen an insurance company’s liability when a qualifying claim occurs. It means you can only receive up to that amount when something happens to your motorcycle.

If your GAP coverage is capped at $35,000, that amount is the maximum you’d receive for a claim. A motorcycle with a total loss of $45,000 would mean you’d need secondary insurance to cover the remainder – or be stuck eating the cost.

Most GAP policies cover the loan amount remaining (replacement value insurance) or the gap between the bike’s value and what you have left to pay.

If the entire loan is covered, you’d need a GAP insurance policy that covers the whole amount. When the negative equity is the primary determining factor, you’d want to review the expected depreciation over the coming weeks and months to ensure your protection.

Some motorcycle GAP insurance options provide money to cover the rider’s insurance deductible to limit out-of-pocket expenses even more.

When Does GAP Insurance Make Sense?

If you took out a loan to pay for a motorcycle, you almost always need collision and comprehensive insurance. It’s required as part of the terms of your agreement. That means you might not need GAP coverage if the collision policy covers a shortfall.

There are some other instances where you may or may not want to consider investing in GAP insurance. Here’s a closer look at some common scenarios.

When GAP Insurance Makes Sense

• You made less than a 20% down payment on the motorcycle and financed it for 60 months or more.
• You’re leasing the bike or trike instead of making an outright purchase.
• The motorcycle is expected to depreciate faster than the national average.
• You have negative equity because of rolling a loan from an older motorcycle or vehicle purchase into this new bike.

When GAP Insurance Might Be Skipped

• You made a down payment of 20% or more when purchasing the motorcycle, limiting your chances of being underwater.
• The current payment plan has you paying off a motorcycle loan in less than four years.
• Your motorcycle make, and model is a type that holds its value well, even if it isn’t a collector’s option.
• You’re willing to assume the out-of-pocket risks to keep your insurance costs at a specific level.

GAP insurance makes sense for some riders. Review this information with your current provider or request a quote today to see if it makes sense to invest in it.