Many pilots tend to focus on liability insurance because it carries the most potential for catastrophic monetary claims. However, hull insurance accounts for nearly two-thirds of your premium, so it deserves careful review with your JAISIN insurance professional.
Aviation coverage basics
Whether you are a private plane owner or renter, there are three basic types of private aviation insurance: liability, medical and hull.
Liability insurance covers bodily injury or property damage to others caused by your alleged negligence as a pilot.
Medical insurance is usually a very small portion of your premium and pays for medical treatment/first aid for minor injuries incurred in an accident. Unlike liability coverage, there is no requirement of proven negligence for payment to be rendered.
Hull insurance provides coverage for physical damage to your own aircraft. There are three subtypes of hull insurance:
- Ground risk not in motion — to cover damage caused while your plane is stationary or not under its own power
- Ground risk in motion — for taxiing, take-off, landing or other on-ground movement
- In-flight — for protection while in the air
Terminology may change but the coverage remains
Keep in mind that different insurance companies use different terminology for these basic types of hull insurance and may group policies into one overarching contract. Although the names may change, the features of each remain.
For example, “ground and flight” includes all ground or air damage regardless of movement, while “not in flight” covers any ground incidents whether the plane is moving or stationary. Your JAISIN insurance professional can explain the particulars of each insurance company’s offerings.
Is your plane adequately protected?
If your automobile is damaged, your claim payment is based on the Blue Book actual cash value (ACV) of the vehicle at the time of loss. With aircraft hull insurance, the plane’s value is based on “stated value” or “agreed value,” which requires your acceptance of your plane’s monetary worth at the time your policy is established.
For example, if you and your insurance company agree that the value of your aircraft is $80,000 (agreed value), then your policy will be written for that amount. If you’re in an accident, you would be covered for up to $80,000 minus the deductible (your out-of-pocket expense). Even if the damages exceed $80,000, that is all the insurance company will pay based on your agreed value. If you have an outstanding loan on your plane and the loan amount is higher than the current market value of the aircraft, you will be required by the lender to secure insurance that covers the higher cost of the loan.
Work with your JAISIN insurance professional to determine the appropriate value and deductible for your situation.
Most hull insurance includes a deductible, usually calculated as a percentage of the plane’s total value. The higher deductible you are willing to carry, the lower your premiums will be. However, whatever deductible you ultimately accept, be sure it is something you can realistically pay at the time of a loss. The goal is to identify your own personal sweet spot, where premium totals are minimized but deductibles are appropriate to your budget and available resources.
Your annual premium will typically be calculated using an equation based on an amount per $100 of insured value. The higher the insured value you select, the lower your rate per $100 will be. That means a plane insured at an agreed value of $10 million might be charged 13 cents per $100, or $13,000, each year, while a plane with an agreed value of $5 million might have a lower overall premium but a higher amount per $100, such as 21 cents per $100, or $10,500 total.
Time for a claim
If your plane is declared a total loss, you will be paid the agreed value that you accepted initially, regardless of the plane’s actual market value at the time of the accident. If your plane is damaged but it’s only a partial loss, hull insurance will typically provide reimbursement for materials, labor, overhead as a percentage of labor costs and the cost of transporting the plane to and from the repair location.
Underinsured or overinsured? Either can be a problem.
Underinsuring your plane brings financial consequence if your loss exceeds your ability to personally cover the cost difference in actual repair and replacement. At the same time, there can be a problem in overvaluing your aircraft. If it suffers extensive damage but you have insured it to a value above its actual worth, you may find yourself having to repair the plane rather than receiving a replacement because you have a higher threshold of total-loss value that cannot be met. Why? Because insurance as a concept is designed to make you whole again, not leave you better off than you were before.
Your experienced JAISIN aviation insurance professional can help you determine a proper value that neither under- nor overinsures your investment.
No surprises during a claim
If you don’t want surprises at the time of a claim, you need to understand the exclusions of your hull insurance. Most hull insurance does not cover damage to your plane caused by:
- Wear and tear
- Mechanical or electrical breakdown
- Excessive engine heat
- War and related perils, including terrorism
- Confiscation by a government authority
Additional exclusions may be specific to the subcoverage. For example, both “not in flight” and “not in motion” coverage may exclude damage caused by a fire or explosion that results from an in-flight crash or collision.
Whichever policy you select, review the exclusions with your JAISIN insurance professional.
As for minor incidents, many pilots are hesitant to submit smaller claims for fear of future premium hikes. However, insurance companies may recommend submission of all claims with a simultaneous request to the adjuster for a detailed report of expected premium increases and policy status changes that could result. Armed with this information, you can then make an informed decision as to whether you want to proceed or drop the claim without repercussions.
Talk to your JAISIN insurance professional about how the claims process works and decide from there.
A word about warranties and policy validity
Hull insurance often includes warranties, which are requirements that must be followed for the policy to remain in effect and to prevent claim denials. Unique aircraft warranties include:
- Pilot warranty — This dictates that only the person named or someone who meets the specific qualifications described in the policy can pilot the plane. If anyone else is piloting, the policy is void.
- Airworthiness warranty — This requires the insured plane to have a valid federal airworthiness certificate. Without it, the policy is invalid.
- Usage warranty — This maintains policy validity only if the aircraft is being used for its declared purpose: pleasure or business travel, charter or taxi service, or commercial.
Be honest about your warranties
If you fail to follow the warranties attached to your hull insurance, you will not be granted any of the promised policy protections. Talk through your planned uses and be honest about your activities.
Flight insurance, your flight path and borders — important exclusions
Aircraft insurance policies written in the U.S. have exclusions regarding losses or occurrences in other countries. If your flight paths run close to or over borders, your insurance coverage or policy validity may be at risk. You may have to purchase additional insurance from a company licensed in that country. Talk to your JAISIN insurance professional about your flight paths and make sure your insurance coverage extends to any countries you could fly over or land in.
Reach out to your JAISIN insurance professional
Call or email your JAISIN aviation liability insurance professional to help you navigate your liabilities. Ask about exclusions, limits and additional endorsements, and be clear about the agreed value as well as the named pilots and other details on your declarations page.
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