Insurance is a gamble: When you take out an aviation insurance policy, you’re gambling that you may have an accident and need the insurance company’s help to pay. The insurance underwriter, on the other hand, is gambling that it can write policies for pilots who will not need the claims money — letting the insurance company make a profit from the premiums.
HOW MUCH COVERAGE IS ENOUGH?
All pilots and airplane owners should discuss their level of liability protection (insurance money to cover defense and judgment costs in the case of an airplane-related lawsuit) with their family, their attorney, financial planner, and an aviation insurance broker or agent. Although only a few states require aviation liability coverage (ask your agent or broker for a current list), it is prudent to at least consider buying the highest level of liability protection you can qualify for and afford.
In Insurance Crisis #1, we discussed why aviation insurance is getting more expensive, and in some cases hard to get at all. This time, we’ll propose some ways to lower insurance costs by looking at the “aircraft physical damage,” or hull insurance options you have when you buy a policy. Please remember that the author is not currently a licensed insurance agent, and iPilot is not an insurance advisor. You alone are responsible for coverage decisions you make after reading these options.
You have several “hull insurance” options to choose from that will greatly affect how much you pay in premiums. For all, keep in mind that larger deductibles may result in lower premiums.
- A) “Full” coverage. The “traditional” route is to insure the airplane for the full value, against risks both in flight and on the ground. This is sometimes called “all risks” or “ground and flight” coverage. “In flight” starts at the time the airplane taxis onto an active runway with the intention of flight, and ends only after the airplane exits a runway under control. ADVANTAGE: Money is available in almost every case of airplane-related loss. DRAWBACK: This is the costliest type of airplane insurance.
- B) “Ground Only” coverage. This is sometimes called “ground and taxi” coverage. With this coverage, your liability protection is in place at all times, but hull protection exists only when the airplane is not in flight. Coverage exists for taxi accidents, theft, storm damage, and almost anything else that happens while the airplane is on the ground. A gear-up landing or a loss of control on takeoff would *not* be covered. ADVANTAGE: Lower cost (as much as 50% off the hull portion of your premium). DRAWBACK: No coverage for any takeoff, in-flight (including off-airport landings) or landing accidents.
- C) “Ground Not In Motion” coverage. This is similar to “ground only” insurance, except that it does not cover any accidents that take place while the airplane is moving under its own power. ADVANTAGE: Even lower cost than “ground only” coverage. DRAWBACK: No coverage for anything that happens once the engine starts, until the airplane is shut down under normal circumstances at the end of a flight.
- D) No hull insurance. You’ll accept the total risk in the event your airplane is damaged. If the insurance company wins the gamble (you never have a claim), you’re money ahead. ADVANTAGE: No hull insurance premium. DRAWBACK: No coverage if the airplane is damaged for any reason.
SO, WHAT’S YOUR GAME? If you’re highly proficient and luck is on your side, or if you have the money to pay for any damage without an insurance company’s help, you may be able to save a significant amount on your premiums by accepting part of the risk yourself. If you’re wrong, you will absorb all costs associated with any damage.
Considerations: Lending institutions require full hull coverage. Translation: If you finance your airplane, you will have full coverage. If you own the airplane outright, though, you may be able to save on insurance by accepting other coverage.
BOTTOM LINE: Ask your agent or broker to describe all of your options, understand them and then, act.
Editor’s note: iPilot has teamed up with NextPolicy.com, a leading new e-marketplace for insurance, to offer iPilot visitors a broad choice of insurance products, including all types of aviation insurances. Take a look!