Your motorcycle loan or lease contract typically requires you to keep certain types of coverage on your insurance policy, such as comprehensive and collision. You’ll also be required to list your lender or leasing company on your policy, which keeps them in the loop on policy changes and accident claims. Despite the insurance requirements, you may have wiggle room with your deductibles and coverage limits to save on your premium.
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What insurance coverage is required for a motorcycle loan or lease?
Your loan or lease may require specific types of insurance on your motorcycle that are meant to protect the lender’s investment in your bike. The required coverage is listed in your contract, making it legally binding.
Common coverage types you may need:
- Liability. Pays for bodily injuries and vehicle damage to other drivers involved in an accident where you’re at fault. This coverage is often required by the state.
- Collision. Covers damage to the bike if you cause an accident.
- Comprehensive. Protects your motorcycle from noncollision accidents, such as theft, vandalism and weather damage.
- Uninsured/underinsured motorist. Gives you coverage, even when the at-fault driver can’t pay for the damage.
Are requirements the same for a loan vs. lease?
In most cases, you’ll have similar insurance requirements for a loaned or leased motorcycle, but some leasing companies have additional requirements. Those may include:
- Liability limit. You may be required to get a higher liability limit than the state’s requirements for a leased motorcycle. This requirement is based on the leasing company’s greater role of responsibility during an accident.
- Maximum deductible. Your contract may also state a maximum deductible you’re allowed to choose on your policy.
- Loan or lease gap insurance. Some companies want to ensure a full payment on your loan or lease, even during a total loss accident.
- Additional insured and loss payee. You’ll need to add your loan or leasing company to your policy as an additional insured party so that it can receive payment for accident claims, if necessary.
What optional coverage should I consider?
When financing or leasing a motorcycle, consider optional coverage for wider protection on the bike. These add-ons can make sure you’re not held personally responsible for unexpected damage, leaving you with out-of-pocket expenses.
Coverage to consider:
- Loan or lease gap. Get help paying the remainder of your loan or lease if your motorcycle gets totaled in an accident. This coverage kicks in after you have settled the accident claim for your totaled bike. If the claim pays less than the full amount of your loan or lease, gap insurance will pay off the remainder.
- Replacement cost. Some companies cover the total MSRP value of your bike without accounting for depreciation. This coverage usually applies to bikes less than two years old. So, if you bought a new bike for $20,000 and it’s totaled, you’ll get $20,000 to buy a brand new bike.
- Customized or optional equipment. If you’ve added customizations like extra chrome, you can get protection against accident damage.
- Maintenance service plan. Prevent breakdowns on your bike by getting regular maintenance or mechanical service plan. These work well if the warranty is expired, or if you purchase a used bike.
How to get motorcycle insurance with a loan or lease
Getting insurance with a loan or lease can involve a few extra steps to reassure your lender or leasing company that you have wide protection. Those steps include:
- Discuss coverage requirements with your loan or leasing company.
- Shop around to find the best provider for you, apply and finalize coverage.
- If necessary, request proof of insurance to show the loan or leasing company. Leasing companies typically require coverage before you drive off the lot with a motorcycle.
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What if I don’t meet my loan or lease insurance requirements?
Without the required insurance, you’re violating the terms of your agreement. The loan or leasing company has the right to reclaim your motorcycle in this situation.
Sometimes, a lending company purchases a forced-placed insurance policy and adds the premium to your loan. This policy is usually more expensive than traditional insurance and only protects the company during an accident, such as with liability coverage.
How does the lender find out about my insurance coverage?
Your insurer may notify the lender about your insurance coverage, particularly when you first buy the policy or make major changes like switching insurance companies. The lender gets notified because they’re typically added to your policy as an additional insured or loss payee.
Your insurance company then sends notice anytime a policy change is made. The lender may then decide to act. The penalties for being caught riding without insurance could include a fine, suspended license or SR-22 bond.
How to get cheap insurance for a financed motorcycle
Factors that determine your rates are the same as an owned motorcycle, although your premium may be higher if you normally wouldn’t buy the coverage that your lender or leasing company requires.
Despite the extra cost of coverage, you can save money on your premium through:
- Lower limits. Opt for the lowest policy limits you’re comfortable with or that your contract allows.
- Higher deductibles. Take on more financial responsibility up front.
- Required coverage. Stick to the add-on coverage your contract requires.
- Discounts. Look for simple discounts such as taking a safety course, paying in full, or insuring multiple vehicles or bundling multiples policies.
- Clean driving history. As with any motorcycle policy, staying safe on the road keeps your rates low.
- Loan payoff. Pay off your motorcycle loan quickly to give yourself the freedom to choose the coverage for you. If you’re still in the buying phase, you can look for a motorcycle loan without prepayment penalties.
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What should I watch out for?
Insuring a loaned or leased motorcycle is fairly straightforward. However, you may want to watch for a few situations:
- Lapsed coverage. If you cancel or forget to renew motorcycle insurance, you could put your loan or lease in jeopardy.
- Violating loan or lease terms. Without the required insurance, the company loaning or leasing to you has the right to add its choice of insurance to your loan or reclaim the bike.
- Total loss damage. If you don’t have gap insurance and you total your motorcycle, you may pay out of pocket for the remaining balance on your loan or lease, as well as any other contract fees.
- Accident claims. Filing a claim is the same whether you own your motorcycle or have a lease or loan. But the lender or leasing company receives the claims payment for any damage to the motorcycle, including a total loss.
Insurance for a loaned or leased motorcycle works similar to a bike you own outright. However, your loan or lease contract may require additional coverage, such as comprehensive and uninsured or underinsured motorist. It may also have other coverage requirements, such as an increased limit or maximum deductible. These requirements may contribute to a higher insurance rate.
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