Wondering if you need motorcycle gap insurance? Someone trying to pressure you into buying it? Wondering what it’s all about?
Well fear not, my fellow rider, for here is everything you need to know (and I mean EVERYTHING)!
You may think that having fully comprehensive insurance would give you maximum protection in this worst-case scenario. An insurer can write off a vehicle where it has been damaged by fire or floods, stolen and unrecovered, involved in an accident.
The unfortunate reality is the bike will have lost money as soon as it was driven away from the dealership and will continue to depreciate over time. Some of the worst depreciating motorbikes can lose almost 50% of their original value leaving you severely out of pocket compared to what you paid for the bike initially. Any settlement from your insurance company will only reflect the depreciated value of your motorcycle.
In addition, if you bought the motorbike on finance the total owing could be more than your insurer’s settlement leaving you supplementing this amount yourself – whilst still having to look at buying a new bike.
The good news is that you don’t have to find yourself in this situation. You are able to purchase Guaranteed Asset Protection – otherwise known as GAP – which protects you from financial loss in the event of a total loss or write off.
Is GAP Insurance worth buying?
If your motorcycle is involved in an accident the likelihood of the bike sustaining severe damage is more likely than with a car. Bikes are also easier to steal than cars. These two factors combined mean that motorbikes are more likely to be written off and so present a much higher risk for owners and insurers alike.
The average purchase price of a motorbike amounts to £9922, whilst an average claim settlement comes to just under £3,000. It’s a sobering thought that your bike can lose as much as 30% of its original value and you can ensure that – for as little as £159- your wallet doesn’t suffer if your pride and joy is stolen or involved in an accident.
Some GAP policies also cover up to £1500 of factory fitted extras that you paid for when you bought the bike.
How does a Back to Invoice Plus+ policy work?
Taking an independent GAP provider ala.co.uk as an example, you can purchase their Motorcycle Back to Invoice Plus+ policy. This is suitable for vehicles bought from a VAT registered dealer and purchased outright or on finance whether obtained through the dealership or a personal loan. A policy can be purchased for vehicles less than 10 years old that has been delivered in the last 180 days.
If the vehicle is written off the GAP policy will pay from your insurance company’s settlement back up to the original invoiced amount you paid for the vehicle. Any finance on the motorbike is cleared by the insurer, the GAP insurer or a combination of the two if required and the amount remaining once that has been paid is yours to do with as you wish.
Read the T & C’s!
It’s easy to see that GAP insurance can save you thousands of pounds if you’re unfortunate enough to have your motorbike written off. It is important when buying GAP, as with all insurance, to look at the wording of the policy to know you’re getting exactly what you pay for.
You don’t have to pay excessive premiums
Most people are offered GAP insurance by the dealer when they purchase their motorbike. If you have been in that situation GAP may have sounded like a great idea, but at an average cost of £299, is an overly large expense.
There are alternatives to buying policies from the dealer – online GAP companies can provide highly competitive, good value quotes.
It is equally important not to be taken in by the cheapest policies available. They often contain hidden clauses and restrictions (see below) limiting any settlement you might receive based on the Glass’s Guide Retail Value of the bike at the time of the write off, which may not reflect the settlement you actually receive from your insurer.
Avoid Market Value Clauses and Glass’s Guide Maximum Payout Clauses
If a GAP policy contains these clauses you may not receive the amount you expect from a claim
Some GAP insurers use Glass’s Guide Retail Value as the absolute figure that your insurance company should settle at. This is not always the case as insurers can use different sources which produce assorted valuations. Where the insurer settles at a lower figure than that given in Glass’s Guide, you can then end up with a shortfall despite buying an insurance designed to avoid that situation.
There are only a few companies that do not use these clauses and instead simply pay the difference between your insurance company’s settlement (even if it is lower than Glass’ Guide) and the original amount you paid for the bike – giving you total peace of mind.
If you decide to change your motorbike before your GAP policy expires, a reputable company should allow you to transfer your policy – without any nasty admin fees.
This is usually done using a pro rata calculation of any unused premium remaining in the policy, which is then deducted from the price of a new policy. All you have to pay is the balance leftover and you get a brand new policy without having to pay the full amount.
UK based, UK underwriters
For most people it is important to buy GAP insurance from a UK based provider with UK based underwriters. These companies should be full authorised and regulated by the Financial Conduct Authority and should be members of the Financial Services Compensation Scheme. This protects you and your policy in the event the underwriter ceases trading.