It’s an expense all airplane owners have to pay, many grudgingly. Just why do we need insurance anyway?
“Aviation is terribly unforgiving of any carelessness or neglect,” says Greg Sterling, general manager of the Aircraft Owners and Pilots Association Insurance Agency Inc.
Well then, why is it so expensive? “In the global insurance business, aviation is a tiny subset,” he says, noting only about 165,000 planes are covered. “A large loss can skew those numbers.”
Other factors skewing those numbers include:
- A 25% rise in hull claim costs since 1997;
- Tort costs that have quadrupled since 1980, to more than $200.8 billion in 2002;
- A drop in the number of companies willing to write aviation insurance;
- The rising cost of repairing aircraft;
- The aging GA fleet, which means that if parts can’t be found, a partial loss becomes a total loss; and
- The rising value of aircraft.
“From 1995 to 2000, the value of a 1972 C172 rose 20%,” he explains. “Nearly all GA aircraft are more valuable today than they were five years ago.”
So what can you do to keep your insurance costs down?
1. Use a broker who specializes in aviation. “One size does not fit all,” Sterling warns. “Find somebody who will be an advocate for you.” A specialist can find just the right insurance company for your situation, hopefully at a better price than you could find on your own.
2. Understand your coverage. “Pilots research their aircraft, their engine shop and their avionics upgrades,” he says. “I know insurance is not as much fun as a Garmin 430, but it’s important to understand it.” Hull coverage usually accounts for 65% to 75% of your premium. This covers physical damage. It’s important to not be over- or underinsured. Review the insured value of your aircraft against the current market value every year. “Remember to adjust for improvements,” he says. When it comes to liability coverage, buy as much as you can reasonably afford. Understand what sub-limits are and the differences between “per person” and “per passenger” limits. Beware of provisions such as “family sub-limits” that can reduce coverage. Consider what is known as “smooth” or unrestricted limits.
3. Pick the right deductible. “Don’t be penny wise and pound foolish,” Sterling says.
4. Read your insurance policy. Pay particular attention to pilot requirements, approved use, policy territory and exclusions.
5. Know how your aircraft affects your insurance. The type of airplane you own, its condition and how you care for it can make a difference in your premium. Older or unique planes will cost more to insure. Put your plane in a hangar and save some money. Keep your airplane in good condition and document it. When it comes time to renew your policy, show your broker photos of the condition of the plane and its equipment.
6. Be aware of how your qualifications as a pilot affect coverage. Stay current, fly regularly and keep your logbook updated. When calculating premiums, companies look at more than total time. Also important is time in type, make and model and the currency of your time. Train beyond the FAR requirements. Get an instrument rating. Attend Wings programs.
7. Have a plan before you move up to your next plane. “Talk to your insurance broker before you go shopping,” Sterling advises. He tells the tale of a pilot who called at 3:30 p.m. on a Friday with the exciting news that he had just bought a Bonanza. When Sterling looked up his record, he found out that the pilot had just 150 hours, none in a Bonanza. “It was the pin that burst the bubble,” he says. “I had to derail the dream.” An insurance broker can work with a pilot to develop a transition plan, detailing what training will occur before the pilot is free to fly the plane by himself. Insurance companies like to hear pilots say “here’s what I’ll do” vs. “what will it take?” That shows a commitment to safety. (By the way, the pilot did get the Bonanza, but he had to put together an extensive training program, as well as accept a “very large deductible,” Sterling reports.)
8. Learn from the mistakes of others. “You will not live long enough to make them all yourself,” he says.
9. Plan for the future now. Every pilot will be a “senior” pilot one day. It helps keep premiums down if you develop a long-term relationship with a company. Most insurance companies have restrictions on pilot age — usually around 60 years — for new business, but will continue to renew pilots who are currently insured with them. “Ask how the company will handle you as you get older,” Sterling says. Stay current and keep your medical certificate current.
10. Renter? Without renter’s insurance, you’re probably flying without coverage. An FBO’s insurance covers the FBO, not you. Even if the FBO’s insurance covers renters, there’s a chance it will be inadequate. “Add ‘am I covered?’ to your checklist,” Sterling says. Renter’s insurance starts around $90.
For more information: 800-622-2672.