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.
It is also important to remember that when calculating ACV for a total loss or theft, the Original Equipment Manufacturer (OEM) parts on the bike had a value and that replacing an OEM part with an aftermarket part could, but does not necessarily, enhance the overall value of the motorcycle. There’s actually even a chance that aftermarket items may decrease the overall value, though this is not typical. In a replacement situation (you swap the OEM seat with an aftermarket seat) the aftermarket part can actually be less valuable than the OEM part or accessory. In a replacement situation, the enhancement value of the aftermarket item can be determined by the cost of the aftermarket part minus the cost of the OEM part. So if your aftermarket seat is more expensive that the OEM seat, you have likely increased the value of your motorcycle, but if your aftermarket seat is worth substantially less than the OEM seat, you may have decreased the value. All accessories and add-ons, like the original motorcycle itself, are subject to depreciation, which also needs to be factored-in. Depreciation is not set in stone, but a rough estimate would be market value of the item at the time of loss.
For the most accurate values of a motorcycle, visit the N.A.D.A. website or go old-school and check the latest print edition. The resources that can assist you are out there and one can be the motorcycle specialists at Rider Insurance. Whether you are insured with us now or with another carrier and just have questions about your policy, we can help. Take pictures, keep receipts and keep an eye on N.A.D.A. and market values. This will all help you when you think, “What is my bike really worth?”.
Plymouth Rock Assurance is a marketing name used by a group of separate companies that write and manage property and casualty insurance in multiple states. Motorcycle insurance in New Jersey and Pennsylvania is underwritten by Rider Insurance Company. Each company is financially responsible only for its own insurance products. Actual coverage is subject to the language of the policies as issued by each separate company.