Aviation Insurance Q&A

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Appropriate liability coverage will be different for everyone based on the exposure of your operation. Here are some factors to consider when determining the appropriate limits.

    1. Number of passenger seats in your aircraft.
    2. Average passenger load per flight.
    3. Composition of passengers – Employees? Family? High Net Worth Individuals?
    4. What assets need to be protected?

Most people think that their policy will cover all Part 91 uses. The covered uses of an insurance policy do not correspond with FAA definitions. There are separate policy forms for all types of commercial uses. Under a pleasure & business policy, you will not be covered for any uses in which a profit is made. On some occasions, you will be allowed to be reimbursed for the use of your aircraft. But, it is very important you talk with your aviation insurance specialist about specific uses of your aircraft and to determine if cost reimbursement is allowed.

Premium financing may be available, just ask your aviation insurance specialist!

Yes, if you would like to cancel your policy, send a written notice to your agent specifying the date in which you would like your policy to be cancelled. But, be aware that you could be subject to a short rate cancellation fee. The most common method is reducing the return premium by 10%. This 10% fee is retained by the insurance company.

Yes. Most people think that they will automatically be covered on the owner’s aircraft policy, but, that is not the case. The insurance company could subrogate against you to be reimbursed for a claim that they just paid to the owner. That’s why purchasing a “Non-Owned Aircraft” Insurance policy is a sound decision.

All insurance companies have different appetites for different risks. Some factors they may take into consideration are loss history of that aircraft, age of your aircraft, value of the aircraft, pilot age, experience and training, where the aircraft will be flown and how much liability you are looking for.

Typically, aviation risks are excluded from business, homeowner’s and umbrella insurance policies. For this type of coverage, you will need an aviation specific insurance policy.

The Open Pilot Warranty is the minimum certification and flying experience required to operate an aircraft without being a Named Pilot. If you are going to let another pilot fly your aircraft, you should first check and make sure he meets these minimum requirements. If you have a friend who does not meet these requirements, we may be able to get him approved as a Named Pilot, in which he would not have to meet the Open Pilot Warranty.

Many airports where you hangar your aircraft will require you to add them as an Additional Insured on your policy. This is common practice and gives them protection arising out of the operation of your aircraft. Keep in mind any Additional Insured on your policy will have access to your insurance coverage and could dilute the liability limits.

CSL stands for Combined Single Limit. A Combined Single Limit is the limit of all of your liability for bodily injury and property damage to others combined. However, it may have sub-limits restricting bodily injury liability for each person or passenger. For Example, if you have a $1,000,000 CSL for BI/PD with a sub-limit of $1,000,000 per passenger or person and you fly a plane capable of carrying 3 passengers, you’re bodily injury liability insurance could be limited to $300,000 ($100,000 for each passenger.) This example would not be a “Smooth” Limit. A “Smooth” Limit is when your bodily injury liability is NOT limited per person or passenger.

Mexico is usually included in the territorial limits of your insurance policy. However, the Mexican Government may require the purchase of Mexican Liability insurance from an insurance carrier licensed in Mexico. In some cases, your current insurance carrier offers this coverage for an additional premium, but they may not. It’s important to consult with your agent if Mexican operations are anticipated.

Aside from the obvious (claims paid, addition of a low time pilot, etc.) a hardening market may be the cause of a premium increase at renewal. Simply put, the insurance industry goes through cycles. In a soft market, premiums go down, underwriting standards relax in order to compete with excess capacity, and insurance companies begin to lose money. When this occurs, some underwriters and reinsurers leave the business. This causes a lack of capacity and the premiums go up, underwriting standards tighten, and underwriters begin to make money again. Seeing the profitability, underwriters come back into the insurance market place and once again begin to bid down the prices, and the cycle starts all over again.

There may be several discounts available specific to each carrier. For example, some carriers may offer discounts for having an instrument rating, taking recurrent training, having no losses or violations, hangaring your aircraft or being a member of certain organizations. The most common factor in premium is pilot experience. It is important every year to give your agent your updated flying hours and training available. The more hours you have, the more likely you will start to see a premium reduction.

Every policy and insurance carrier has different approved territories outlined in the policy. If operations outside of the continental U.S. are anticipated, it is important to consult with your aviation insurance specialist.

Insurance carriers will only issue quotes to one insurance agency at a time. The first broker who submits a quote request for you is your “Broker of Record” for that carrier. But, the choice of your broker is up to you and can be changed if you wish. In order to do this, you will need to fill out a Broker of Record Letter declaring which agency you wish to be your Broker of Record. When the Broker of Record Letter is signed and submitted, it terminates the relationship between you and your current broker and takes away their ability to negotiate your account. It also appoints your new broker, which then transfers the ability of negotiating your account to that new broker. Another aspect to be aware of is that if the old broker already received a quote or was declined, the new broker will get the same quote or declination, so there’s no use in changing brokers every time you’re declined. After the Broker of Record Letter is submitted, there is a waiting period that gives your former broker the opportunity to review and confirm your final decision to change brokers. It is really in your best interest to pick an agent you are comfortable with and allow them to market your insurance.

A lot of contracts regarding your aircraft have insurance or hold-harmless agreements. When you sign these agreements, you’re obligated to conform to whatever provisions they may contain. Because of this, there is a possibility that whatever contract you sign could limit or void your insurance coverage. You should consult with legal counsel and your aviation insurance specialist on all contracts or agreements you may enter into.

Unfortunately, Yes! In the event of an accident the policyholder will be sued as the owner of the aircraft. But, there could also be a separate lawsuit naming the pilot negligent and responsible for the accident. The insurance carrier will automatically defend the policyholder, but unless you were named as an additional insured on the policy, you may not have protection. Being an additional insured on a policy is different from being a Named Pilot. It’s important to discuss the specifics with your aviation insurance specialist.