Motorcycle Insurance Articles
How Total Loss Is Calculated For A Motorcycle Insurance Policy
2011-08-20
When you take out a motorcycle insurance policy, it is important to read the fine print of the policy. They will define what total loss means as well as how they calculate it. Ninety-nine percent of insurance companies will calculate total loss using the ACV or actual cash value. If you are involved in an accident where the damages are higher than the total value of the motorcycle, then you will be filing a total loss motorcycle insurance claim.
A motorcycle insurance policy is going to be more expensive, on average, than that of an automotive policy because the likelihood of incurring a total loss is much greater. When you experience a total loss, you look towards the insurance company to give you the money you need to either fix the bike that you have or give you the money to buy the same kind of bike again.
It's important to understand how total loss is truly calculated. You get what is considered the actual cash value. This is based upon what the motorcycle is worth, minus the depreciation. If you have an older bike that you have worked on yourself with new parts and a lot of your own labor, you may be disappointed by the check that you are cut by the insurance company.
If there is no market for your item because it is a replacement part or it was custom designed, then the part does not actually have a value, because according to value books, the part doesn't exist. Insurance companies don't discredit the fact that you legitimately have a loss; however they need a way to determine the costs of everything to keep it fair from customer to customer.
Your labor is not technically a part of the motorcycle, although it may have played a huge part in getting your motorcycle to the condition it was before the accident. Therefore, when total loss is calculated, though, your labor won't be reimbursed.
While the ACV does appear to be deceiving, the insurance company uses this as a way of calculating the total loss motorcycle insurance claim that they receive from you. If you have a new bike, then the factors are less likely to impact you.
It's better to understand what that total loss means now so that you understand what you would and would not be entitled to down the road.
Motorcycle insurance policies are needed in order to drive the bike down any highway in the United States. As you get quotes from different companies, you may want to ask questions about what their total loss calculations include so that you don't get any surprises later on.