Aircraft Insurance: What Type Should Pilots Carry?

Dr. Mary Ann O’Grady

Your aircraft and flying skills represent wonderful business and personal capabilities, but they may also constitute one of the largest exposures to catastrophes that you can imagine. So, the following summary details a list of the most critical aircraft insurance coverage types and [potential] losses:

Aircraft Hull Insurance

Aircraft hull insurance covers physical damage to the aircraft as a result of an accident where the insurer has the option to pay for the repairs or to declare it a total loss, which requires that the insured pay the insured value that is stated on the policy.

Aircraft hull insurance premiums are calculated on $100 of the insured value of the aircraft where the higher the insured value, the lower the rate per $100 drops. For example, the hull premium for a midsized jet that is not used for commercial purposes and has an insured value of $10 million might cost $13,000.00 or 13 cents per $100 of insured value. In comparison, an older version of the same jet that is insured for $5 million might have a premium cost of $10,500.00 or 21 cents per $100 of insured value.
Aircraft hull insurance is required by the bank if you have a lien on the aircraft; however, you would also need it unless you can afford to withstand an uninsured loss.

Caveat: Since aircraft hull insurance is predicated upon the aircraft’s agreed-to or stated value rather than its cash value, there is a potential for over-insuring or under-insuring it which can be problematic. For example, when the hanger collapsed at Dulles International Airport near Washington, D.C. in 2010, many of the damaged aircraft were significantly over-insured. This resulted in a situation where the insurers were forced to repair aircraft that the owners would have rather declared as total losses. Therefore, the accurate insured value to carry on the aircraft is its current market value or lien amount whichever is greater; coverage for war-risk perils should also be included since it offers broad additional coverage for a small additional premium. Annual reviews of aircraft insurance coverage should be conducted and adjusted at the time of renewal if necessary.

Aircraft Liability Insurance

Aircraft liability insurance covers liability for bodily injury or property damage that arises from an accident, and the insurance is written on a single-limit-per-occurrence basis, such as $100 million per occurrence. This type of aircraft insurance includes [legal] defense costs over and above the stated liability cap.

Aircraft liability insurance premiums are typically a flat amount that is based on factors, such as the selected liability limit, the pilot(s) who are flying the aircraft and/or the owner/pilot, and the approved use (Part 91 versus Part 135). Using the midsized jet mentioned previously as an example, with an insured valued of $10 million, the approximate annual premiums for ascending liability might be $8,500.00 for $100 million of coverage, $17,000.00 for $200 million of coverage and $25,000.00 for $300 million of coverage. These quotes will vary based on the age of the aircraft and the extent to which the underwriter opts to place a greater premium on the hull insurance and less of a premium on the liability component of the coverage. There could also be rate surcharges of up to 25 percent depending upon how much or often the aircraft is used for charter flights.

Aircraft liability insurance is needed by everyone since it protects against the largest catastrophic loss exposure, such as accidents resulting in injury or property damage due to which you are most likely to be sued even if the suit is groundless.

Caveat: Buy as high a limit of coverage as you can afford since it is likely that you will not find out whether you have enough coverage until after you have experienced a loss. The liability claims generated by a crash while carrying one or more high-net-worth individuals or when flying over a populated area could easily exceed $100 million. So for that reason, carrying $200 million to $500 million liability limits can certainly provide additional peace of mind. As with hull insurance, carrying coverage for war-risk perils is recommended since it offers broader additional protection for a small additional premium.

Approved Pilot Clause

Approved pilot clause covers who is authorized under a policy to act as pilot-in-command or second-in-command on an aircraft.

There is no specific premium associated with this approved-pilot clause, but the overall policy premium directly correlates with the pilots’ experience level and their training protocol. Obviously, the better qualified the pilots and the more stringent their recurrent training and safety initiatives, the lower the premiums will be.

Approved pilot clause is included in all policies; however, a disproportionate number of claim denials are directly related to the fact that the pilots flying aircraft did not meet the exact criteria of their pilot clause. For example, a Falcon 900 that aborted a takeoff and exited the runway causing extensive damage to the aircraft was denied the claim by the insurer because the copilot that day, although well-qualified, had not completed the insurance-related training for the make and model of the aircraft.

Caveat: If only one section of the aircraft insurance policy is renewed each year, this should be the section and it should be negotiated by an aviation insurance broker as the broadest approved-pilot clause possible. The clause varies greatly among insurers so if the insured is not represented by an experienced broker, he or she will be at a distinct disadvantage. Be sure to provide the flight department and/or any other pertinent parties with a copy of this section combined with any evidence of required recurrent training when the insurance policy is received annually. Also, note that virtually without exception, the primary pilots of all turbine/jet aircraft must complete annual recurrent training at an insurer-approved facility whether or not such training is stipulated in the policy. In addition, this training is critical when statistics purport that 85% of aircraft accidents are a result of pilot error.

We will continue to explore additional aircraft insurance options in an upcoming Part 2 on this topic.

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How My Aviation Knowledge Helped Air Force One

Honor, Duty, Country … and Flying?

Shawn Arena

Hello again! Hopefully, my prior adventures have been interesting and informational for all readers; this one, however, while not describing any daring or skillful airmanship on my part (ok, my opinion), it does provide one of the most unique experiences I have ever been part of … and flying (or rather, my aviation knowledge) came in handy as I helped out Col. Mark Tillman, one of the pilots of Air Force One.

It All Started With a Wildfire

On June 18, 2002, the beginning of one of the worst wildfires in the history of Arizona was started by an arsonist in east-central Arizona. To those who may not be familiar with the geography of Arizona, outside of the larger cities and towns within the state (i.e. Phoenix metropolitan area, Flagstaff, Tucson, and Prescott), many parts of Arizona (believe it or not) are covered by dense, forested areas. East-central Arizona is no different. And as we learned from Science Class 101, once you combine heat, oxygen, and fuel, you have conditions ripe for fire. While wildfires are (unfortunately) common that time of the year, this particular one was very devastating (when it was extinguished on July 7 it had consumed 436,000 acres).

At the time of this event, I was working at Phoenix Sky Harbor International Airport (PHX) as the Airside Operations Superintendent. Collectively, all airport operations staff were closely monitoring what was happening in the fire affected areas and were prepared to offer any assistance to not only first responder fire crews providing air support, but any airports in the region. Needless to say, it was a very fluid and unsettling time. To put things in perspective, when an event of that magnitude are headline news on the national scene, you KNOW it is big.

Air Force One Gets Involved and My Aviation Knowledge Comes Into Play

Air Force One official visit photoAs Airside Operations Superintendent, it became very common (and I don’t mean to be flippant, nor arrogant in this statement) to have frequent interactions with Air Force One’s comings and goings within the metropolitan Phoenix area. For the first few times, it is exciting, exhilarating, and hectic. Prior to any presidential visit, the Air Force One Lead team (AF-1) and Secret Service agents, swoop in and (almost) take over the place! These lead visits are typically 1-2 weeks ahead of the event itself, so you have some time to digest what is happening…..(Ah yes, our taxpayer’s money at work!). However after a few times, it becomes almost typical and (depending on your airport) frustrating because they literally can close down your airport for their entire operation.

As I stated, MOST of the time you get a 1-2 week notice. Because of the enormity of the situation and national headlines it created, we were given a 1 DAY notice. The AF-1 Team and Secret Service prepped where everything is to be in place for the next day. As the Lead AF-1 agent was leaving for the day, he asked me if I could promptly show up the next day at 0700.

I arrive for my ‘ShowTime’ at 0700, and while the entire AF-1 Team was buttoning up loose ends (i.e. the B747 would be followed by a Gulfstream to whisk the president to east central Arizona), the Lead agent turned to me with a piece of paper and simply asked: “Can you take care of this for me?” THAT was when my aviation knowledge / flying / skill kicked in (after my initial OMG moment), it was the Flight Plan for Air Force One and he wanted me to file it with the Prescott Flight Service Station!

Air Force One flight planNot having gone through this before, I was curious why the agent calmly waited by my side until I was finished (he knew what was coming). I took out my cell phone and called Prescott FSS and upon initial contact with the Briefer, I stated: “This is PHX Operations and I want to file the Flight Plan for Air Force One.” And then I realized why the agent was nearby, because after the briefer’s (almost comedic answer) “Yeah, right” the agent took the phone and said, ”That is correct sir, listen to the man and let him file the plan.” I dutifully went through the entire filing process with the briefer. When completed, and to my utter astonishment, the agent started walking away and said to me “Oh, just keep the paper, we don’t need it anymore.

Proud to be an American (Aviator)

I held that sheet of paper as if I was handed the original Declaration of Independence. I could not believe it…I immediately thought to myself…”do you realize you have American/presidential/aviation history in your hands, and I bet not too many civilians get this opportunity” I cherished that flight plan not only for the aviation significance BUT for the magnitude of the events themselves.

Fast forward 13 years to July 2015. I finally got up enough courage to personally write a letter to (now) former President George W. Bush at his Library outside of Dallas and explained the situation (not that I’d expect him to remember), and asked if he would kindly sign it for me. As aviators, we are taught to always have a contingency plan, so I made a copy just in case the original never returned. To my excitement it DID return and he DID sign it. I plan to proudly display it along with pictures taken that day and the business card of the Air Force One agent who let me file the plan.

Signed Air Force One photo

In closing, (as I stated in the beginning) this wasn’t an airmanship focused story, but one of national pride tied into the thought…” if I was NOT a pilot and knew what to do with it, it would have been just following orders and I would have ignored the significance.” Take your learning and flight training seriously, because you never know when your aviation knowledge could serve you, and your country.

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You can get started today by filling out our online application. If you would like more information, you can call us at (844) 435-9338, or click here to start a live chat with us.

Featured Image: US Air Force