Is Gap Insurance Right For You

Motorcycle.com Staff
by Motorcycle.com Staff
Envision you recently got a brand spaking new Suzuki GSX-R1000 motorcycle fourmonths ago, and it was stolen right before you as you were walking out of alocal supermarket. No big deal, you are wholly covered by the theift insuranceportion of your full coverage motorcycle insurance policy your motorcycle lenderforced you to obtain with your new motorcycle loan, right?



Well not exactly, if you dig into the particulars of the motorcycle insurancepolicy. The explanation for this is that the majority of full coveragemotorcycle insurance policies will shield against total loss such as a stolenmotorcycle, an accident that results in a total loss or an uncontrollablenatural disaster, however these cycle insurance policies likely only cover thedepreciated marketplace cost of the motorcycle not the outstanding value of yournew motorcycle loan.

Hence, in cases you selected a zero down payment cycle loan or perhaps adeferred payment private label credit card new motorcycle loan, your SuzukiGSX-R1000 most likely will have depreciated considerably faster than you havepaid down the value on your motorcycle loan. For that reason your motorcycleinsurance coverage usually only covers the going depreciated NADA market valueof your motorcycle. You are liable for the difference in the value the insurancecompany pays you for your stolen or totaled motorcycle and what you actually owethe lender on your motorcycle loan.

If a motorcycle is stolen or deemed a total loss buyers in the first 25 monthsof a motorcycle loan could be the most in danger to not being reimbursedsufficiently from their motorcycle insurance coverage to cover the value oftheir motorcycle loan. Therefore what is a cycle purchaser to do to for defenseagainst the unsettled value of their new motorcycle loan?

The answer for a lot of new motorcycle riders lies inside a slightly knowninsurance coverage called Guaranteed Asset Protection insurance. Gap is ainsurance policy usually referred to as a total loss policy which will give backthe difference of the total amount your cycle insurance company pay’s you for acomplete loss on your new motorcycle and the cost of your motorcycle loan.

For illustration here is a quick example. Envision your Suzuki GSX-R1000 has adepreciated marketplace value of $7500, but you owe the finance company $9,500for the value of your motorcycle loan. In the event of total loss such as astolen motorcycle or a crash that results in total loss, the motorcycle coveragewill likely reimburse you the NADA used market value of $7500. This is unluckyto you because you still owe the finance company $9500 so you have a gap of$2,000 ($9500-$7500=$2000). Gap insurance guards you from the $2000 gap whichyou still owe to the financing company since the motorcycle insurance companysimply paid you $7500 for your stolen or completely totaled Suzuki GSX-R1000.

Is guaranteed asset protection (GAP) insurance for all riders looking for amotorcycle loan? Not exactly, it highly depends on your motorcycle loancontract. Below find tips on making a decision if gap insurance is right foryou.

1. If your motorcycle financing was 0 down payment specially for a longer termlike forty-eight-eighty-four months GAP insurance is more often than not a goodidea to protect your motorcycle loan. However, whenever you place a big downpayment down with your cycle financing you are routinely better off with no GAPinsurance.

2. If the motorcycle model you are buying depreciates rapidly, GAP insurance isprobably a good choice to protect your motorcycle loan. To determine this,compare the depreciation rate of your new motorcycle with the pay down of theprincipal on your motorcycle loan. This will give you an indication if you wouldbe upside down if your cycle was taken or completely totaled.

3. Check all of the facts of your full coverage cycle insurance policy to assurethat it does not cover the gap between the market worth of your cycle and theoutstanding debt of your motorcycle loan. A incredibly small percentage of cycleinsurance policies cover the cost of your motorcycle for the 1st year withoutconsidering depreciation. If you are fortunate and your full coverage insurancepolicy guards you from total loss on all of the motorcycle loan withoutconsidering depreciation there is probably fairly little need for gap insurance.

4. Is a used motorcycle model going to be purchased in your loan transaction? Ifso there is almost certainly not an option for you to choose gap insurance sincemost gap insurance policies are merely available on brand new cycles. As aresult, used motorcycle riders are told that it is best to put down an ampledown payment and choose to repay the cycle financing in the smallest possibletime.

5. How much can you get the gap insurance for? Does the prices justify thebenefit of gap insurance?

As a whole, depending on the motorcycle loan terms gap insurance can have somewonderful financial guarantee to cycle buyers purchasing a new motorcycle usinga motorcycle loan. Although, every motorcycle consumer's circumstances will bedifferent and the above five tips are very helpful in coming to a decision ifgap insurance is the best choice.

Copyright (c) 2006, by Jay Fran. This article may be freely distributed as longas the copyright, author's information and a link back to http://www.motorcycle-financing-guide.comis published with the article.

Authors's Bio Profile:

Jay Fran is the creator of Motorcycle Financing Guide a website to help new motorcyclebuyers discover the greatest possible terms on new & used motorcycle loans.Motorcycle-Financing-Guide.com explores a collection of subject including 72month motorcycle loans, military motorcycle financing, Gap insurance and overallmotorcycle financing recommendations. If your are seeking to purchase amotorcycle with financing be sure to check out http://www.motorcycle-financing-guide.com.
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