Jeffrey Wade
Guaranteed Asset Protection (GAP) insurance is a financial product that covers the difference between the payout from your insurance company and the amount you paid for your motorcycle if it is stolen and not recovered or written off. This type of insurance is designed to protect you from financial loss if your motorbike is declared a 'total loss' or write-off by your insurer.
| Characteristics | Values |
|---|---|
| Full name | Guaranteed Asset Protection Insurance (GAP) |
| Purpose | Protects the policyholder from financial loss if their motorbike is declared a 'total loss' or write off by their bike insurer |
| Applicability | Applicable to new and used bikes (up to 8 years old) bought from a VAT-registered dealer within the last 180 days |
| Coverage | Covers the difference between the market value of the bike at the time of the incident and the purchase price |
| Cost | Starts from under £100 for a three-year policy; varies based on the bike's value, policy term, and level of cover |
| Necessity | Not a legal requirement but recommended for those who owe more on their bike than its current market value or want to avoid potential out-of-pocket expenses in case of a total loss |
| Types | Finance gap insurance, return of invoice gap insurance, agreed value gap insurance, vehicle replacement gap insurance |
| Location | Location affects the cost of the policy due to varying risk profiles of different postcodes |
| Age | Age of the policyholder can influence the cost of the policy, with younger riders often considered higher risk |
| Risk factors | Model and make of the motorbike, age and experience of the rider, rider's claim history, motorbike's storage location, purchase price of the motorbike, and its depreciation rate |
| Claims | Claims process is easier when purchasing gap coverage from the insurance company |
What You'll Learn
When is the best time to buy GAP insurance for a motorcycle?
The best time to buy Guaranteed Asset Protection (GAP) insurance for a motorcycle is when you owe more on your bike than its current market value. This is because GAP insurance is designed to protect you financially in the event of a total loss, by covering the difference between what your standard insurance pays out and what you originally paid or still owe on finance.
You can typically buy GAP insurance at any time as long as the loan or lease isn't paid off, although some insurance companies may only offer a limited amount of time to purchase coverage. For example, BeMoto requires you to buy a GAP insurance policy within 180 days of purchasing your motorcycle.
If you put zero or very little money down on your bike loan, GAP insurance might be a good idea, especially for the first few years that you own your bike when it depreciates the fastest. If you made a significant down payment, you can probably go without GAP insurance.
If your bike model depreciates more rapidly than most, GAP insurance may be a good idea for you.
If you are purchasing a used motorcycle, GAP insurance is not an option. GAP insurance is only for new motorcycles.
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What is Return to Value (RTV) GAP insurance?
Return to Value (RTV) Guaranteed Asset Protection (GAP) insurance is a financial product that covers the difference between the insurance valuation of your motorcycle and its value when you took out the GAP insurance.
For example, if you take out RTV GAP insurance on a 2-year-old bike worth £7,000 at the time and your insurance company pays out £5,000 after a total loss, the RTV GAP insurance could cover the £2,000 difference.
RTV GAP insurance is usually only available for bikes up to a certain age, for instance, 5 years old. It is also more difficult to obtain this type of policy for older motorcycles.
RTV GAP insurance is particularly useful if you have a small deposit, as the amount of finance you need as a proportion of the bike's total value will be high. This means the amount the bike is likely to depreciate in a short amount of time is higher, and you're more likely to be in negative equity for longer.
Additionally, motorcycles are more prone to being written off in accidents than cars. A dent in the frame, serious bodywork damage from a slide, or a broken headlight and clocks from a slow-speed frontal impact can render the bike a write-off. If you have a superbike worth £20,000, with £18,000 of finance, if it is written off within the first 12 months, the insurance company might value the bike as low as £13,000, meaning you'll have to find around £5,000 to cover the shortfall. RTV GAP insurance would cover this shortfall.
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What is Replacement GAP Insurance?
Replacement GAP Insurance, also known as Vehicle Replacement Insurance (VRI) or Vehicle Replacement Gap Insurance, is a type of financial product designed to protect motorcycle owners in the event of a total loss. It is particularly useful if you owe more on your bike than its current market value or if you have financed your bike and want to avoid potential out-of-pocket expenses in the case of theft or a write-off.
If your motorcycle is stolen or written off, your insurance company will likely only reimburse you for the bike's actual cash value or its market value at the time of the loss. This is where Replacement GAP Insurance comes in. It covers the difference between the insurance payout and the cost of the same motorcycle at today's prices.
For example, if you bought a motorcycle for £10,000 and it is written off after two years, when its market value is £7,000, the Replacement GAP Insurance would cover the difference between the insurance payout and the current cost of that motorcycle. So, if the same bike now costs £11,250, the insurance would cover the £4,250 difference.
This type of insurance is especially relevant if you have a small deposit on your bike, as the amount of finance you need as a proportion of the bike's total value will be higher, and you are more likely to be in negative equity. Additionally, it doesn't take a major accident to write off a motorcycle; even a slow-speed frontal impact can result in a Category C or D write-off, leaving you with a significant financial burden.
Replacement GAP Insurance is not a legal requirement, but it can provide valuable peace of mind and ensure you are not left out of pocket in the event of a total loss. It is worth noting that this type of insurance is more common for cars than motorcycles and may be harder to find. However, specialist brokers can offer tailored policies, although they may charge a premium for this service.
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Is GAP insurance a legal requirement?
GAP insurance is not a legal requirement. However, it is a smart choice for those who want to protect themselves financially in the event of a total loss or write-off of their motorcycle.
GAP insurance is designed to cover the "gap" between the market value of your motorcycle at the time of a total loss and the amount you originally paid or still owe on finance. This can be especially important for motorcycles, which can depreciate quickly and may be at a higher risk of theft.
While not mandatory, GAP insurance can provide valuable peace of mind and financial protection. It is worth considering if you owe more on your motorcycle than its current market value, have financed your motorcycle, or own a luxury bike with a high-value depreciation rate.
The cost of motorcycle GAP insurance will depend on factors such as the value of your bike, the term of your policy, and the level of cover you need. It is recommended to shop around and compare different policies to find the best deal for your specific needs.
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How much does GAP insurance for motorcycles cost?
The cost of GAP insurance for motorcycles varies depending on the provider and the vehicle being covered. It typically costs a few extra dollars per month and can be purchased from a dealership, a lender, or an insurance company. For example, one person on Reddit mentions paying $500 for 60 months of GAP insurance, which equates to $12 per month. Another Reddit user mentions that Progressive charges $5 per month for GAP insurance.
GAP insurance is generally more affordable when purchased from an insurance company, but not all insurance companies offer it. It is also worth noting that GAP insurance is only available for new motorcycles, as it is designed to cover the difference between the loan balance and the actual cash value of the vehicle in the event of a total loss.
When deciding whether to purchase GAP insurance, it is important to consider the likelihood of needing it. Factors such as the down payment, the APR, and the rate of depreciation can influence the decision. Additionally, some regular motorcycle insurance policies may already include coverage for the difference between the market value of the motorcycle and the loan balance in the event of a total loss, so it is essential to carefully review your existing policy before purchasing GAP insurance.
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Frequently asked questions
Motorcycle GAP insurance is short for Guaranteed Asset Protection Insurance. It covers the difference between what your standard insurance pays out and what you originally paid or still owe on finance if your motorcycle is written off or stolen.
If your motorcycle is stolen or written off, your insurance company will pay out the 'book price' or market value of the motorcycle at the time of the incident. Motorcycle GAP insurance covers the difference between this payout and the amount you originally paid for the motorcycle or the amount you still owe on finance.
GAP insurance for a motorcycle is entirely optional and not a legal requirement. However, it is a good idea if you owe more on your bike than its current market value, if you want to avoid potential out-of-pocket expenses in the case of a total loss, or if you own a luxury bike with a high-value depreciation rate.
