We as motorcyclists are a different breed. For most of us our motorcycles are more than a mode of transportation. They are more like treasured art which we have over time modified and created to make unique to us. When someone damages or destroys the precious object in an accident, to us, they have damaged or destroyed a priceless artifact, not just damaged a motor vehicle. However, to the insurance companies, our motorcycles are merely motor vehicles which carry a fair market value just as any other motor vehicle does. Unless you have protected your bike, if it is totaled in an accident, all you will receive is fair market value, regardless of how much you owe on it or how much you think it is worth.
Fair market value is the amount that the motorcycle would sell for on the open market. Not to be confused with what you would ask for if you were to sell it. The insurance companies will look to the NADA many times to gauge the value of a motorcycle. They will also look at what similar motorcycles are selling for in your geographic area. I often get complaints that the insurance company is not taking into consideration items such as chrome or exhaust in computing a value. Keep in mind that fair market value is not computed by adding up all that you have invested in the motorcycle. If you add $2,000 worth of chrome to your bike that does not necessarily mean the bike is worth $2,000 more than before you added it. The question is, can I as a buyer go out and purchase another bike like it for less. The answer is often yes. You can go on Cycle Trader or eBay and find a plethora of motorcycles chromed to the hilt being sold for much less than you would sell it for. In fact, Jim Cannon, who is with our firm, tracks what motorcycles are selling for on sites such as EBay in order to be able to better articulate to an insurance company why a motorcycle is worth more than they are offering. That is why I tell clients that if they want to put chrome on their motorcycle, do it because you like the chrome, not because you want to add value to your bike. I also advise that they save their receipts. While you can't always get the full value of what you invested, you can sometimes get more by documenting what you have invested, depending on what was added and when it was added.
So what can you do to protect your bike? Other than what I advised above, you can purchase gap insurance. Now do not be confused. Gap insurance does not mean that you get replacement value for your motorcycle. What gap insurance does is pay the difference of what the motorcycle is worth, and what you owe. It keeps you from being "upside down" in your loan. By way of example, let's say you buy a bike for $15,000. One year down the road you owe $13,500 but the fair market value is now $11,000. You are in an accident and your bike is totaled. The insurance company is going to pay you $11,000. That means that you will still owe $2,500 on a motorcycle that you do not have any more. Trust me; those are painful payments to make. However, if you bought gap insurance, that would make up that $2,500 difference so that you would not find yourself owing further on the bike.
You can also insure your motorcycle for a certain amount, often called scheduled value. What that means is that if your bike is totaled, the insurance company will pay that pre-set amount. Take that $15,000 bike that you bought in the previous scenario. You schedule the bike at $15,000. The same year goes down the road and it is worth $11,000. If you are in an accident and the bike can be fixed, then the insurance company will pay to have it fixed (they have to put in the same condition it was before the accident). However, if it is totaled, they will pay you $15,000.
The bottom line is that the vast majority of us are riding with what is called an "actual cash value" policy (ACV). If our motorcycle is totaled, we will get the actual cash value of that motorcycle. If you, as many of us do, see your motorcycle as something that you have a personal investment in and you want to protect that investment, then you need to make sure that you purchase more than an ACV policy. Otherwise, your investment is at mercy of free market; and the free market will almost always determine that your motorcycle is worth less than you think it is.
The preceding is for informational purposes only and should not be considered legal advice. Before attempting to settle any claim you should contact an attorney. The rules governing insurance coverage may be different in your state .
Tom McGrath is a personal injury lawyer with credentials that are rare in his profession. When Tom's not lawyering, he's lobbying to protect your rights, or crisscrossing the Commonwealth teaching motorists and motorcyclists about their rights, helping them to understand the insurance laws and how to protect themselves and their loved ones. Got a question? Send Tom an email at firstname.lastname@example.org, or visit http://www.motorcyclevirginia.com/.