Simple Guide to Complex Aviation Insurance
If you own an aircraft, you would know how quickly things can turn around. No matter how many safety measures you take, it is never enough. Insuring your aircraft is essential so as to avoid losing what you probably worked so hard to achieve. Any kind of plane is very heavy on the pocket both for buying and maintaining and it is prone to accidents and natural disasters. Now, for most people aviation insurance would seem complicated. With aircrafts the purpose behind the insurance differs from one kind of insurance to another. Here are some coverage types in regard to aviation that are very crucial:
Aircraft Hull Insurance
This type of insurance covers any kind of physical damage to the aircraft from any accident. The insurance provider would either repair the damages or pay the set value in full if the aircraft is deemed beyond repair. Unless you do not care about losing an aircraft or two, you should get this insurance as even a small damage can run up thousands of dollars of bills that you will have to pay from your own pocket. If the aircraft has a lien, this insurance would be a requirement.
The premium you pay every year is based on the insured value, per $100 of it. If the value is high, the rate per $100 would be low. So the premium you pay largely depends on the kind of aircraft you have and how it is used. An older plane with less value would obviously have lower premium than a latest jet with very high value.
When you buy this insurance, you agree to a value of the plane and that value is what determines the coverage of damages. Since it is not based on the cash value of the jet, there is a chance of getting underinsured through a lower stated or agreed upon value than the current value. On the hindsight, some planes might even get over insured which can be a problem for the insurer should a serious accident occur to the jet. Ideally, the value should be the current market value of the plane or the lien amount. Keep in mind war-risk perils so that you have even more protection. However, you will be paying a bit more of the premium. It is important to reconsider the coverage every year and adjust accordingly.
This insurance would cover any bodily or property damage due to an accident. There is a set limit of coverage amount per occurrence. Besides the liability limit, there are defense costs too associated. Anyone who owns an aircraft needs this coverage because if the jet causes any property damage, you are likely to be sued. So this insurance would also cover defense, no matter what the gravity of the claims are.
The premium is a set amount but it is based on a number of things. Generally, it depends on the liability limit you chose. For instance, a jet with an agreed upon or set value of $10 million would warrant a premium of around $17,000 for $200 million coverage in liability. This premium amount increases directly as the set liability coverage amount increases. This coverage too depends on the sort of airplane, its age and its condition. Not only this, you might have to pay a surcharge of one-quarter if your plane is heavily used for charter flights.
You would essentially want to get the maximum coverage you can because with a plane you can easily be sued for millions of dollars and you only realize it after the damage has been done. If you damage a property that has very high value, such as a historic place or a populous urban spot, or if you crashed with a person with high net worth, you are easily looking at hundreds of millions of liability claims.
Approved Use Insurance
This insurance would cover reimbursement from someone who uses the aircraft but does not own it. This is a complicated clause and often times not much attention is paid to it. Most policies have an approved use clause and it varies from one company to another. With an experienced broker, there is a chance you get a most suitable clause that covers most aspects of this kind of coverage as oftentimes insurers get away with difficult clauses. The premium for this sort of insurance is not specific but generally commercial aircrafts are charged more than noncommercial aircrafts. Depending on what you are receiving for the use of your aircraft, your plane might be considered as a commercial plane which makes insurance claims difficult.
Approved Pilot Clause
All insurance policies have an approved pilot clause which covers the pilots and the second flying the aircraft as part of the policy. The premium for this clause is highly dependent on the pilot and his experience and performance in recurrent training. The more qualified the pilot, the less premium you pay. The pilots are required to take recurrent training at an insurer approved facility every year. This training is only good for you and your aircraft as it will lower the chances of accidents.
Much like approved-use clause, this clause is also determined by the insurer and can be very complicated. If an experienced broker is not representing you, chances are you will end up with a clause that will not prove helpful when your pilot makes a mistake. This clause needs review annually and you must make sure the pilots and concerned parties are fully informed of any changes. Most claims are denied because the pilots flying the planes do not meet the criteria set in this policy.
Hull and Liability insurances remain the most important ones that require an experienced broker to negotiate the best possible policy. However, the approved use and approved pilots clauses are no less important as many accidents are a direct result of pilot’s mistake whether you, the owner, are using the jet or someone else. An aircraft is a very expensive commodity that requires insurance for every possible reason.