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Imagine you just purchased a brand new Suzuki GSX-R1000 motorcycle two months ago, and it
was stolen right before your eyes as you were eating in your favorite restaurant. Not to worry, you
are fully protected by the full coverage motorcycle insurance policy your motorcycle lender
required you to get. Right?
In most cases, not exactly, if you look into the details of the motorcycle insurance policy you
purchased. The reason is that most full coverage motorcycle insurance policies will cover for total
loss such as theft, accident or natural disaster, but these policies typically only cover the
depreciated market value of the motorcycle not the outstanding value of your motorcycle loan.
Therefore, if you opted for a zero down payment motorcycle loan or perhaps a low payment credit
card motorcycle loan, your Suzuki GSX-R1000 may have depreciated faster than you have paid
down the value on your motorcycle loan. Since your motorcycle insurance policy will most likely
only cover the depreciated market value of your Suzuki GSX-R1000, you are responsible for the
difference in the value the insurance company pays you for your stolen or totaled motorcycle and
what you actually owe on your motorcycle loan.
In the event a motorcycle is stolen or totaled, motorcycle buyers in the first two years of a
motorcycle loan are the most susceptible to not being reimbursed enough from their motorcycle
insurance policy to cover the value of their motorcycle loan. So what is a motorcycle buyer to do
to protect against the outstanding value of their motorcycle loan?
The answer for some motorcycle buyers lies in a little known policy called gap insurance. Gap
insurance is a total loss insurance policy that will pay the difference of the amount your motorcycle
insurance company pay's you for a total loss on your motorcycle and the value of your motorcycle
loan.
Here is a quick example. Let's say your Suzuki GSX-R1000 has a going depreciated market value
of $7500, yet you owe $9,500 on your motorcycle loan for it. In the event of total loss such as theft
or an accident, your motorcycle insurance policy will likely only pay you the used market value of
$7500. However, you still owe your motorcycle lender $9500 so you have a gap of $2,000
($9500-$7500=$2000). Gap insurance covers the $2000 gap that you still owe to the motorcycle
lender since the motorcycle insurance company only paid you $7500 for your stolen or totaled
Suzuki GSX-R1000.
Is gap insurance for everyone? Not exactly, it really depends on your financing arrangement.
Here are some tips in deciding if gap insurance is right for you.
1.If you entered a zero down payment motorcycle loan especially for an extended term like 48-84
months gap insurance is probably a good idea for you. On the other hand, if you put a large down
payment down with your motorcycle loan your probably better without
gap insurance.
2.If you are getting a motorcycle loan on a motorcycle model that has a history of depreciating
very fast, gap insurance is likely a good alternative for you. To determine this, compare the
depreciation rate of your motorcycle with the pay down of the principal on your motorcycle loan.
This will give you an indication if you would be upside down if your motorcycle was stolen or
totaled.
3. Check all of the details of your full coverage motorcycle insurance policy to make sure that it
does not cover the gap between the market value of your motorcycle and the value of your
motorcycle loan. A very small percentage of motorcycle insurance policies cover the value of your
motorcycle for the first year without considering depreciation. If you are lucky and your full
coverage insurance policy covers 100% of the motorcycle without considering depreciation there
is little need for gap insurance.
4. Are you purchasing a used motorcycle? If so there is probably not an option for you to
purchase gap insurance because most gap insurance policies are only good on brand new
motorcycles. As a result, used motorcycle buyers are advised to place down a decent size down
payment and opt to pay of the loans in the shortest possible time.
5. What is the cost of the gap insurance policy? Does this cost justify the benefit?
Overall, depending on the financing situation gap insurance can provide some excellent financial
security to motorcycle buyers purchasing their motorcycle with a motorcycle loan. However, each
motorcycle buyer's situation is different and the above five factors can be helpful in determining if
gap insurance is the right decision.
Copyright (c) 2006, by Jay Fran. This article may be freely distributed as long as the copyright,
author's information and the below active live links are published with the article.
AuthorÂ’s Bio
Jay Fran is passionate about motorcycles and designed Motorcycle-Financing-Guide.com to assist
motorcycle buyers in making the right decisions on motorcycle loans and bad credit motorcycle
financing.
Article Source:
http://EzineArticles.com/?expert=Jay_Fran
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