Motorcycle Actual Cash Value (ACV)
What's My Bike Worth?
The age-old question that comes with buying motorcycle insurance is, “What is my vehicle really worth?”. Generally, the value is usually based on the actual cash value (ACV). As with most things, there are exceptions, for instance replacement cost and stated value policies. But let’s save those topics for another time.
As defined by the International Risk Management Institute, actual cash value (ACV) is replacement cost (RC) minus depreciation. When buying a new motorcycle like any new vehicle, the value of that bike depreciates as soon as it leaves the dealership. Classic and rare vehicles are the exception, since they typically gain value over time.
Actual cash value can be also based on fair market value. Fair market value is what the current market is willing to pay if a motorcycle was bought in used and in good condition. These conditions are rated as how well the bike looks visually and how well it works mechanically. As per N.A.D.A. (National Automobile Dealers Association), the overall condition, mileage, history and local supply and demand contribute to the asking price of each vehicle.
Rider Insurance uses the N.A.D.A. book because it is more comprehensive and tends to be more generous in vehicle value than other evaluation books. As per N.A.D.A., their editors review over one million sales transactions per month to help support valuation numbers. The Kelly Blue Book is another popular evaluation method for bike shopping or personal use. The Kelly Blue Book is not a resource approved by all state government banking and insurance departments, for this reason Rider Insurance does not utilize Kelly in ACV calculations.
When evaluating a claim, it can be tricky to determine the value. A motorcycle that is stolen or totaled may have accessories or extras and not all accessories are covered. It is important for you to ask your motorcycle insurance provider questions and read your motorcycle insurance policy to make sure you understand how bike accessories will be treated in case of a loss. All insurance companies handle accessories differently and there is typically a sub-limit.
If your accessories are covered by your motorcycle insurance policy and you do suffer a total loss or theft, securing a fair and equitable ACV is vital for both you and your insurance carrier. Overall, the process is made easier in any situation if you have receipts, photos and other documentation, but a theft loss in particular can get complicated if your documentation is inadequate or non-existent. Without proper documentation, proving that the items were actually purchased and on the bike when it was stolen can be difficult, if not impossible, and as a result, there’s a chance that the accessory value will not get factored into the ACV, or the impact will be minimal. Take photos of your bike. Keep receipts. Hopefully, you’ll never need to use any of it.