I would like to buy an aircraft. What are the insurance implications?
Most people who are looking into an aircraft purchase do quite a bit of research. They have learned about market cost, maintenance costs, parts availability, and AD history. People want to know more than just how fast, how far, how much will it lift. Make sure that you include the cost and availability of insurance in your research. Especially if you are making a transition, you may find that cost, limit of liability or training requirements may influence your decision. Here are some other things to consider when you are buying an aircraft:
Does the airplane or helicopter currently have insurance?
Sometimes sellers will let their insurance lapse, and the buyer's insurance won't become effective until he or she owns the airplane. This can be a real problem if you want to test fly the aircraft. Don't count on non-owned coverage here, because it will only respond if you are at fault. If you test fly an airplane which has no insurance of its own, and which is damaged as a result of mechanical failure, there will probably be no insurance for anybody, even if you have non-owned physical damage coverage.
- Does the aircraft have a current airworthiness certificate?
Most policy forms exclude coverage for ferry flights, even if the FAA has given you a permit. Let your broker know the details, and get the company's specific approval before the airplane is flown.
- Exactly when do I take title to the aircraft?
This is a tricky business. Some transactions are very simple, others are extremely complex, often for tax reasons or because the airplane is being ferried from another country. In general, let your broker know the details of the transaction, and he or she can take it to the company if it is unclear. If the insurer understands your closing situation and has agreed in writing to cover it from a specific point, you can cross this off your worry-list.
- Will the aircraft be ferried by a temporary pilot?
If so, make sure that this pilot has been approved as a pilot by your insurer before takeoff. Contract pilots may also request to be included as additional insureds. This may involve additional premium. More important, you must decide whether you want to share your liability coverage with a professional pilot.
- If formal school is part of the deal, think it all the way through.
Especially when pilots step up to their first large twin or turbine, insurers will often require formal school. Would you prefer to get some time in the airplane with an approved instructor before you get thrown into simulator sessions, or would you like to go to school first? Most carriers go along with you either way as long as you have a sensible training plan. If part of the training will be in your airplane, think through how you will get it to school and back. And make sure that you can get a school slot when you want it.
- If there are dual instruction requirements, watch out.
If you are required to get a check out or other training from a CFI, make sure that the CFI meets the requirements of your pilot warranty, including time in the specific make and model. If he or she does not, call your broker and get specific approval from the company. Until you meet the pilot requirements, someone has to, and if the CFI does not, you may not have any coverage.
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What can I do to lower my insurance premiums?
There are some things you can do to lessen the 'bite' of your annual premium:
- Help us paint a picture.
The more concise a picture of your flying experience you give an underwriter, the more comfortable he or she will be betting his company's money on you and your airplane. Aviation underwriters often have substantial latitude when deciding whether to accept a risk, what training requirements will be, and how much to charge for it. Accurately and truthfully completing applications and pilot forms will help your broker to present your situation in the best possible light. Also, let them know about any problem areas. For instance, if you have had an accident, be forthcoming about it, and tell them what corrective action you have taken, such as remedial training. If you haven't had time to fly much, detail any recurrent training you have done to keep sharp.
These are the sorts of things that underwriters look at, and that, rightly or wrongly, help them make risk assessments about you.
- Get recurrent training in your airplane annually.
This is becoming more and more of an issue. This used to be limited to turbine powered airplanes, but some underwriters are now beginning to require it in helicopters and all sorts of fixed wing airplanes, including some heavy singles and light twins. What an underwriter requires depends upon your type of aircraft and to some extent, your experience level. Ask your broker what carriers expect before you pay for training. Make sure you are spending money to good effect. Even if you are flying a Skyhawk or a Cherokee, a WINGS phase will help. Recurrent training is probably the single most important thing that you can do to reduce your premium.
- Upgrade your skills.
VFR pilots should consider getting instrument ratings, especially if you are flying a 6 seat airplane or a retractable. If you hold a Private Certificate, consider getting your Commercial. We can't tell you exactly how much this will save you, but it is sure to help, especially if you are considering a transition into a more complex aircraft.
- Fly as much as you can.
Most underwriters are interested in how much you have flown in the last year, and in most cases, the more you have flown, the better.
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How much can I be reimbursed for letting other people use my aircraft?
This can be a killer if you have not paid attention. Each policy is different. Some will allow you the same items as the FAA does, including the 100% fuel and oil allowance. Others won't even allow for fuel reimbursement. Some say you can charge whatever you want, as long as you don't intend to make a profit. The only way to know for sure is to check your own policy or call your broker. And if you change carriers, remember to look at the wording in the new policy. It's probably different.
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Why can't I get more liability coverage?
For the past 20 years, jury awards for injuries in aircraft accidents have been increasing. Since the vast majority of the U.S. civil fleet is more than 20 years old, passage of the General Aviation Revitalization Act (GARA) means that manufacturers are no longer involved in these lawsuits, leaving the aircraft owner as the main target. Insurer's feel that whatever limit they offer on a light airplane or helicopter will be used up in the event of a serious accident. In this kind of environment, they don't think that they can charge enough for their product, and would rather not sell it. As a result, getting limits of liability over $1,000,000 is becoming increasingly difficult. For owners who need it, excess liability is now available in most states if you have enough aircraft liability coverage.
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What is a Broker of Record Letter, and how does it work?
Each time an underwriter offers a quote, he or she is relying on a substantial amount of information about you, your flying experience, the airport you will be flying out of, the type of operations you will be conducting, and so forth. Change some of the information, and the quote changes. As a result, underwriters will only offer a quote to the first broker who comes to them. The company assumes that broker is acting as your designated representative, or the "broker of record." If later, you wants to change brokers, this can be done with a letter called a broker of record letter.
A broker of record letter will:
- Allow the broker that you designate to approach all of the companies to obtain quotes that have been released, and to act as your broker negotiating and binding coverage;
- Terminate the ability of any other broker, including your current broker, to do the same;
- Provide a 5-day wait after it is presented to the underwriters. They will then call the first agent, who may call you to confirm that you wish to change agents.
A broker of record will not:
- Allow the new broker to get you better pricing, or cause an underwriter to offer a quote if they have already declined to another broker, unless there is a substantial difference between the information presented by the first and second brokers.
Be sure that you understand what the letter means before you sign it. Our recommendation is that you pick one good broker with access to all of the companies to represent you. Call around and talk to a few who have been recommended by friends. Decide who you think will do the best job for you. A good aviation insurance specialist will get you quotes from as many underwriters as possible every year, will explain the differences, and make a recommendation. Sending 2 or more brokers into the market at the same time will sometimes cause companies to lose interest and decline to offer a quote to anyone.
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Can I fly outside the United States?
All of the policies are worded differently, and you need to look at yours for the answer. Most cover the U.S., Canada, and Mexico. Some cover the Bahamas, and some cover the Caribbean. In the event that you wish to fly beyond your policy territory, call your broker. Often, underwriters will give specific approval if they have the details. If you plan to go to Mexico, be sure to have your agent supply you with a Mexican public liability certificate. These are issued by Mexican insurers, but can be purchased from your broker with a few days notice. You will need to have this in your aircraft when clearing customs.
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Why does insurance for seaplanes and helicopters cost more than for fixed wing landplanes?
Seaplanes and helicopters make up a very small part of the light aircraft population, so underwriters have a smaller number of units over which to spread the cost of the inevitable losses. Seaplanes and helicopters also tend to operate down low where they are likely to collide with things like birds, wires, towers and submerged objects. Helicopter claims tend to be expensive because so much of the helicopter is moving. Seaplanes and amphibian claims often involve total immersion of the airframe in water, requiring time consuming repairs to radios, electrical systems, and anti corrosion measures.
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What questions should I ask about an insurance company I am thinking of using?
Where's the money? The first thing to find out is whether a company has the financial strength and stability to pay its claims. There are several companies that rate insurers including A.M. Best, Standard & Poors and others. Most of the "insurance companies" in the aerospace industry are underwriting managers rather than actual insurers. The managers make use of the capital of one or more actual insurance companies. In most cases, ask your broker for the Best rating.
Nickles and Dimes. Once you find out if they are able, you need to know if they are willing. This is more of a reputation issue, but brokers will tell you. You can also talk to shops that do insurance repairs. Some carriers will stick absolutely to the letter of their contract, and go no farther. Others quite literally see each claim as an advertising opportunity, and do everything reasonable to make you walk away smiling. Most claims contain some gray areas, and it usually is worth a slightly higher premium to stay with a more liberal company so you won't be 'nickled and dimed' if you have a claim.
Service. The next issue is underwriting flexibility. If you are considering taking on partners, changing aircraft, or making some other big change, let your broker know. He or she can tell you which carriers are most likely to work with you in different areas.
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If I am named as a pilot on someone else's policy, am I covered by their insurance if there is an accident?
Maybe. If the aircraft is owned by a company and you are an employee during the flight, you are probably covered. If you are using the aircraft with the permission of the owner, you are probably covered for liability as well, as long as you are not acting as an aviation professional, such as a flight instructor, ferry pilot, and the like. If you are flying for hire, you or your employer should have some coverage for flying non-owned airplanes. Just because you are named as a pilot, don't assume that you have coverage. The fact that you are approved means that the policyholder will be protected against lawsuits while you are flying his or her aircraft.
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My CFI has asked to be 'an additional insured,' and for a 'waiver of subrogation.' Should I do this?
Because your policy excludes coverage for CFI's or other professional pilots, many CFI's will ask owners they are instructing to be included as insureds. If you and your insurer agree to this, your coverage will protect the CFI against lawsuits that arise from injury to others and damage to others' property during the flight. It also means that you are sharing your coverage with your CFI, and there may be less available to protect you. Also bear in mind that your insurance company will need to agree to this in advance, and that there may be an additional charge. A waiver of subrogation means that you and the insurer agree not to bring a suit against the CFI for physical damage to the aircraft during instructional flights. If you provide a waiver of subrogation to a CFI or anyone else flying your airplane, you may have a loss that goes on your record when it was really the fault of someone else. Give thought to both of these, and get your insurer's permission before you agree to either one. Some instructors will require both before they set foot in your airplane. You may decide that the knowledge you gain from the flight outweighs the temporary risk.
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