Why do insurance companies total motorcycles with little damage?
When a bike is deemed a total loss, the insurance company that pays you is only responsible for what it agreed to pay in the policy, which is usually the bike's actual cash value, regardless of how much you owe on it or believe it to be worth. Insurance companies account for the amount of money the bike would sell for on the open market, which doesn't always correspond to how much you've spent on the motorcycle or accessories.
Most new motorcycles lose around 19-27% of their value in the first two years, with a 5% decrease happening as soon as you drive it off the lot. Bikes depreciate more slowly as they get older, but their value continues to drop as they age and rack up mileage. Accessories generally don't add their full purchase cost to the bike's resale value either.
The result is that your motorcycle’s actual cash value is likely less than what you've spent on it. Thus, totaling a motorcycle takes less damage than you'd guess given depreciation and age factors.
Insurance coverages that can help with a totaled motorcycle
When you take out a motorcycle insurance policy, you'll have a choice of optional coverages in addition to your state's required minimum motorcycle liability coverage. Some insurers, including Progressive, allow you to select a policy that covers the bike's replacement cost rather than its actual cash value if it's totaled. Learn more about state requirements for motorcycle insurance.
Optional coverages like gap insurance can help you pay off your loan in the event you total a motorcycle – that way you don't have to continue making payments on a bike you don't have anymore. Comprehensive motorcycle insurance and motorcycle collision coverages may also help in the event of an accident, and extra motorcycle insurance coverages for accessories and custom work can help you get back more of your investment.
What to do with a totaled motorcycle
When your motorcycle is totaled, or considered a junk motorcycle, you have options for how to dispose of it. The easiest option is to transfer the title to your insurance company and let them handle the disposal. You can also opt to keep the totaled motorcycle, but that can result in a lower payout since your insurance company may reduce payment by the expected value of the salvage. If you opt to retain the totaled motorcycle, you may be able to sell it to a motorcycle salvage yard or to a private party, scrap it for parts, donate it, or rebuild it depending on your interest, time, and skills.