Published: April 2016
For riders, purchasing a brand new motorcycle can be a dream come true. But before you get out on the open road, you may want to consider the insurance implications of owning a new motorcycle. Fortunately, you can purchase additional coverage specifically for new motorcycles that may help protect your investment in your brand new bike if it's damaged or totaled.
The Insurance Information Institute (III) explains that the collision and comprehensive coverages on a standard motorcycle insurance policy may help repair or replace your motorcycle if it's damaged. However, comprehensive and collision coverages typically pay only up to the motorcycle's actual cash value. Actual cash value is the cost to repair or replace your bike minus depreciation. Like other vehicles, motorcycles tend to lose value over time, according to National Appraisal Guides.
So, if your motorcycle is totaled while it's still nearly new, the actual cash value of your motorcycle may be lower than the amount you'd need to replace your bike with a similar model. Also, if you have a loan, you might still owe money on your new motorcycle. In these situations, the payout you receive from a standard motorcycle insurance policy after a covered loss might not be enough to replace your bike or repay your loan in full.
You may want to consider these additional types of coverage to help protect your investment in your new motorcycle. They are:
New motorcycle replacement coverage. If your motorcycle is totaled, new motorcycle replacement coverage may help replace the totaled vehicle with a new motorcycle, rather than paying you the actual cash value (which may be lower) at the time of the accident.
Repair provision coverage. If your new motorcycle is damaged in a covered loss, this type of coverage may help pay for repairs without taking depreciation into account.
Loan/lease gap coverage. This coverage helps protect you if you lease a new motorcycle or take out a loan to buy it. If your motorcycle is totaled in an accident, the actual cash value of your motorcycle may be less than the balance of your loan or lease. Loan/lease gap coverage may help protect you by covering the difference between your motorcycle's value and what you still owe on your loan or lease.
What counts as a "new" motorcycle may depend on your insurer. If you buy a motorcycle second-hand, it likely won't be eligible for the new motorcycle coverages described above.
New motorcycle protection is typically only available when you purchase a motorcycle that is newer than two model years old. And this coverage typically expires once the motorcycle is more than a few model years old.
All of these coverages are typically subject to your policy limits, which set the maximum amount your policy will pay out if your motorcycle is damaged or totaled. A local agent can provide more information to help you decide if extra protection is right for you.