Gap Coverage
Gap, also called auto loan or lease assistance coverage, is an optional motorcycle coverage that helps pay the difference (or the “gap”) between the amount of money you owe on your motorcycle and the total cost to replace it with a new one. Long loan and lease terms and depreciation can often leave people owing more on their loan or lease than the motorcycle is worth.
FAQs
What does lease/loan gap cover?
After an accident, the insurance company will calculate the actual cash value (ACV) of your motorcycle, which is based on the cost new of the motorcycle less depreciation. Let’s imagine that you purchase a new motorcycle for $15,000 and you have a loan or lease on it. Just a few short months after you purchase the new motorcycle, you are involved in an auto accident that results in a covered total loss. The insurance company determines that the ACV for your motorcycle is $10,000 but due to the terms of your loan, you still owe $14,000 on your motorcycle. This would leave you with a $4,000 dollar gap in your coverage and a $4,000 bill for a motorcycle that you no longer have. If you have gap coverage, the $4,000 is covered by your insurance policy and doesn’t have to come directly out of your pocket.
Is lease/loan gap coverage required?
This coverage is usually optional but it may be required by your lender, especially if you have a lease on the motorcycle.
What isn’t covered by lease/loan gap coverage?
If you use a home equity loan or a line of revolving credit to purchase a new motorcycle (versus an actual auto loan) this coverage is not available. Gap coverage also does not pay for things like late payment penalties, extended warranties or loan rollover balances.
When do I need lease/loan gap?
If you’re in the market for a new motorcycle, gap insurance is something that you should seriously consider. A good way to determine if this coverage is right for your situation is to obtain a current bluebook value for your motorcycle prior to purchasing it. Compare the bluebook value to the amount you owe on your loan and if the amount you owe is more than the bluebook value, gap insurance would be a smart decision. If you do add gap coverage to your motorcycle policy, you can remove this coverage once you owe your lender less than what your motorcycle is worth. Keep in mind that the dealership may offer this coverage to you when you purchase a new motorcycle but that you may be able to get this coverage from your insurance agent for less than the dealership cost.