A variety of motorcycle insurance policies are available. Each one is a bit different from the next in terms of what it offers in coverage. As you choose one, it is up to you read through the details to determine just how fitting the policy is to your particular needs. One area that is easy to overlooked but very important to consider is what happens when there is a total loss to your bike. How can the insurance company reimburse you for this loss if it is due to a covered claim? How it reimburses you is directly dependent on the type of coverage outlined in your policy.

Actual Value or Replacement Value?

Let’s say you have a very old motorcycle. You simply love the fact that you’ve customized various components of the bike. It has outstanding value and may even be a collector’s item one day. If this bike is totaled, replacing it can be hard to do. On the other hand, you may have a modern, affordable middle-of-the-road bike. It’s a common bike, one that could easily be repaired because parts are generally easy to find. If this bike is totaled, finding another may not be that hard.

What happens with motorcycle insurance can be tied directly to your policy. If you have actual value insurance, it helps pay you what the value of your bike is at the time of the loss. If you have replacement cost coverage, it may pay out enough for you to replace that bike. Classic or hard-to-find bikes are hard to replace, of course.

When choosing a bike, choose full replacement cost for your bike whenever possible. This most likely gives you the highest possible opportunity to get back on your bike. If you own a bike that’s older or not in the best shape, your insurer may not reimburse you enough to purchase a new bike. Depending on what your goals are for motorcycle insurance, it is usually best to work closely with your insurer to customize a policy that meets all of your needs and reduces your risks as much as possible. It could make a big difference in the long term on your financial risks.