Gap Insurance is a product offered to you when you purchase a motorcycle. Gap Insurance can be very valuable to you in certain situations and is something you should consider.
What Is Gap Insurance?
Gap Insurance is a type of insurance that covers the difference in what you finance for a motorcycle compared to what book value will be should the vehicle be stolen, or involved in an accident and is a total loss.
When you purchase your motorcycle, you will not only pay for the motorcycle, but there will be additional fees, such as freight, set-up, doc fees, taxes and licensing. So you may be paying $10,000.00 for your motorcycle, but financing $12,000.00.
Should your vehicle get stolen, the book value may only be $10,000.00, less perhaps a $500.00 deductible, and some depreciation based on the motorcycle. Your insurance company may only pay your finance company $9000.00, which means you will still have a balance with the finance company for $3000.00. That $3000.00 becomes your responsibility. This is where Gap Insurance comes in.
Do I Really Need Gap Insurance?
The answer to this question is not always. If you take the scenario from above, instead of financing the whole amount, you put a down payment of $5000.00 on your motorcycle, so you only financed $7000.00. In this case, should an incident occur that results in the loss of your motorcycle, the insurance company would be able to pay off your finance company in full for the amount you still owe.
Top Considerations When Purchasing Gap Insurance:
Are you buying a motorcycle with very little or no down payment? Are you buying a motorcycle that will depreciate rapidly? Are you paying a high interest rate?
Did you roll over a loan on a trade-in?