Aviation insurance

Features of Aviation Insurance in the USA

Aviation insurance and aircraft insurance have their own characteristics. Many of us are used to buying insurance for cars, homes, or belongings.

For business owners, there are also many types of insurance available. However, aircraft insurance is unique for several reasons.One of the factors is the specificity of the aircraft itself—planes and aviation equipment require a specialized approach to insurance due to their complexity and cost. Flights are associated with high risks, and insurance must consider possible accidents, damages, and third-party liabilities. It’s also important to remember that the aviation industry is strictly regulated, and insurance must comply with these requirements.

What does aircraft insurance in America include?

Aircraft insurance covers several key aspects such as:

• Hull insurance, which covers damage or loss of the aircraft.
• Liability insurance: Protects against third-party claims in the event of accidents or incidents.
• Crew and passenger insurance: Provides protection for people on board.

These features make aircraft insurance in the USA unique and important for aircraft owners and aviation business operators.

Suppose you own a private aircraft in Florida that you want to protect from various damages related to accidents. These could include, for example, a bent wing that needs repair.

An aircraft can be used almost anywhere, and the principle of operating it is the same. Moreover, anyone—be it a relative or friend—can fly the plane.

Speaking of airplanes, it’s worth mentioning that there are different types of planes, such as piston airplanes:

• Multimotor planes
• Piston planes with various power types. Each plane has different seating capacities and handling characteristics, which is why insurance companies are interested in ensuring that the pilot is specially trained. It’s important for insurance companies to understand whether the pilot can ensure safe operation. It’s also worth emphasizing that an aircraft will have a much higher value than a car. For example, new Gulfstream jets are priced above $65–70 million.

There are also planes with 5, 10, or even 20 seats with liability limits, usually offering coverage from $100 million to $500 million.

Why do you need aviation insurance in the USA?

If you have a small airplane, there are risks associated with potential damage to other people’s property or damage to your own aircraft. Large airlines also face risks when transporting passengers, as they can cause damage to passengers or third parties. Therefore, aviation insurance is necessary.

How does aviation insurance work?

Aviation insurance works similarly to auto insurance. We have liability insurance, which covers damage caused to third parties due to our negligence. There’s also collision or comprehensive insurance, which protects our own aircraft. This is called hull coverage, which covers the exterior of the aircraft or the aircraft itself.

When you buy airplane insurance, there are two main categories: liability insurance and passenger liability insurance.

1. Liability insurance:

It works similarly to regular liability insurance and covers losses related to bodily injury or property damage to others. For example, if your aircraft damages a building due to your fault, liability insurance will cover this damage.

     2. Passenger liability insurance:

Regular liability insurance does not extend to passengers on board. Therefore, to insure passengers, you need to choose passenger liability insurance, which covers them during the flight.

Additionally, just like in auto insurance, there is medical insurance that covers small amounts, such as $5,000 or $10,000, for providing first aid to passengers or workers, regardless of who is at fault.

Now let’s consider physical damage insurance:

It’s similar to collision or comprehensive insurance in auto insurance and covers the aircraft itself. There are three main scenarios of physical damage:

1. 1. The airplane is stationary on the ground.
   2. The airplane is taxiing on the ground before takeoff.
   3. The airplane is in flight.

These categories help protect your aircraft and cover potential losses.

Ground coverage applies when the aircraft is stationary and not moving. It covers losses from, for example, a fire.

Moving coverage applies when the aircraft is taxiing on the ground before takeoff. In-flight coverage protects the airplane during flight and on the ground, providing the most extensive coverage for all scenarios.

If your aircraft is damaged and undergoing maintenance, and you are not using it for several months, you can use the idle class, where the insurance company refunds part of the premium.

Factors affecting premium calculation and discounts include:

1. Flight hours: The more flight hours the pilot has on a specific aircraft, the greater the discount.
2. Loss history: If you’ve had losses in the past, the discount will be smaller.
3. Type and size of the aircraft: Using the plane for leisure or short distances gives more discounts than using it to transport passengers.
4. Ratings: Pilots and planes receive ratings that affect the premium.
5. Storage location: If the aircraft is stored in a secure location protected from the elements, you’ll receive more discounts.
6. Aircraft usage: Using the plane for military purposes or in dangerous zones reduces discounts.

It’s important to remember that every policy must include the specific aircraft you are insuring, and that the process of licensing and certification for aircraft pilots is much stricter than for car drivers. The more experience and flight hours the pilot has, the more discount on the premium.

Many people think buying aviation insurance should be as simple as auto insurance, but it’s not, because these two industries operate very differently. Most of us buy auto insurance long before we acquire our first plane. In auto insurance, there are many well-known companies you can contact directly for a quote. We’ve all seen ads from Geico, Progressive, and Allstate saying: “Buy from us,” you go to their websites, get quotes, and save money on car insurance. So, when you buy car insurance, you probably go to two or three well-known companies or search for car insurance on Google, where all the top companies appear on the first page.

However, aviation insurance is different. There’s only one company that works directly with clients—VEMCO. All other major aviation insurance companies work through brokers, such as BWI. When you search for aviation insurance on Google, the first page is filled with leading aviation insurance brokers, not insurance companies. Each of these brokers typically works with the same top aviation insurance companies. So, if you send the same aircraft and pilot information to several brokers, it can lead to confusion and reduce your chances of getting the best rate.

If you use more than one aviation insurance broker to get quotes from the same insurance companies, it may cost you extra money.

For example, you search for aviation insurance on Google and find the first broker. You provide him with your aircraft and pilot information, and he sends it to all the aviation insurance companies. In an ideal world, he would get quotes from all the companies.

However, if you then go to a second broker and provide him with the same information, he won’t get the same quotes as the first broker. This is because half of the companies won’t open quotes, as they are already tied to the first broker. In aviation insurance, this is called market blocking. Companies link aircraft and pilot information to the first broker, and other brokers cannot get quotes from those companies.

So, if you send information to several brokers, each subsequent broker will be limited in the number of quotes they can get. This is especially important if you’re moving to a more complex aircraft, as your application is likely to be reviewed manually by an underwriter.

Underwriters who handle thousands of aircraft insurance applications daily are few in number. Their job is to efficiently review aircraft and pilot information and assess risks. If they receive the same information from multiple brokers, it may frustrate them, and they may reject all applications. This reduces your chances of getting a good offer.

The best way to buy aircraft insurance is to find a reliable aviation insurance broker you trust who will represent your interests in the market. Here are three tips on how to choose the right broker:

1. Check online reviews. Professional and experienced brokers will have positive reviews from clients.
2. Ask pilot colleagues. Find out which broker they recommend in similar situations.
3. Ask the broker questions. When you call the broker and provide your aircraft and pilot information, ask which insurance companies they work with and why. An experienced broker should immediately name the companies and explain their choice.

Instead of sending information to multiple brokers, it’s better to work with one great broker who will compare companies, quotes, and coverages for you.

Mistake pilots make when insuring airplanes

Many people mistakenly believe that insurance brokers are insurance companies. This mistake can cost you money. It can also directly affect your ability to insure your plane. Pilots mistakenly assume that the aircraft insurance process is identical to the car insurance process in the USA.

It’s best to contact one broker, provide him with all the information about the aircraft and the pilot, and allow him to search for the best deals on the market. When multiple brokers send insurance requests for the same aircraft, it can confuse underwriters and insurance companies, reducing your chances of getting a good rate.

What affects the cost of aviation insurance?

The cost of aviation insurance depends on many factors, and understanding how these factors affect the premium will help you better plan expenses and manage risks. Let’s look at the main elements considered when calculating insurance costs:

1. Type and value of the aircraft: The price of the insurance policy is directly related to the type of aircraft, its value, and technical characteristics. More expensive planes require higher coverage, which increases insurance premiums. For example, jet planes or business-class planes may cost significantly more to insure than light single-engine models.
2. Age and condition of the aircraft: Older aircraft may be more expensive to insure due to potential maintenance issues and a higher likelihood of breakdowns. However, if the aircraft is well-maintained and upgraded, this can positively affect the premium.
3. Pilot’s experience and qualifications: The pilot’s professionalism and experience play a key role. The more flight hours the pilot has, the lower the likelihood of incidents, which reduces insurance premiums. Special certificates and pilot ratings can also lead to discounts.
4. Purpose of the flights: The purpose of using the aircraft also affects insurance costs. Aircraft used for commercial purposes or charter flights require more coverage than planes used for personal or recreational flights.
5. Routes and geography of flights: Flights in challenging weather conditions or in regions with high risk may lead to increased premiums. For example, regular flights to high-traffic zones or countries with unstable political situations can raise insurance costs.
6. Loss history: The history of previous insurance claims and losses can significantly affect the premium. If you’ve had incidents in the past, the insurance company may consider you a high-risk client, which will impact the policy cost.

How can you reduce the cost of aircraft insurance?

1. Choosing the right coverage: Analyze your needs and choose coverage that matches your actual risks. For example, if you rarely fly in challenging weather conditions, you might consider excluding certain items from the policy to reduce costs.
2. Safety discounts: Implementing additional safety measures, such as equipment upgrades, regular maintenance, and having pilots complete additional training courses, can lower insurance premiums.
3. Working with a broker: An experienced insurance broker will help you find the best deal on the market and select the optimal policy, considering all the nuances of your business. Work with one trusted broker to avoid confusion and maximize benefits.
4. Installment payments: Many insurance companies offer payment plans, helping you spread the financial load over the year.
5. Package insurance: If you have multiple types of insurance (such as aviation and property insurance), consider bundling them into one package. This may reduce the overall premium cost.
6. Constant monitoring and updating the policy: Regularly review and update your insurance policy, especially if your aircraft usage conditions change or new requirements arise. This will help you avoid overpayments and ensure adequate coverage.

Conclusion

Aviation insurance is a complex and unique field that requires a specialized approach to protect your investments and ensure flight safety. Whether you own a small private airplane or manage a large airline, choosing the right insurance coverage is a key step in minimizing risks and protecting your assets.

If you want to get professional advice and arrange reliable insurance for your aircraft, contact us. Our specialists will help you select the best insurance products, considering all the features of your business and the type of your aircraft. Message us to receive a personalized offer and be confident in the safety of your flights.