First Time Buyers - Aircraft Insurance Information

  Buying a first airplane is as exciting for most people as buying a first car. Most first-time airplane buyers approach their purchase very much the same way as they do when shopping for an automobile. Typically, they first decide how much they can afford to spend on an airplane — it might be $20,000 or $400,000, depending on their income, obligations and priorities — and then they start scanning Trade-A-Plane looking to find how much airplane that much money will buy.  One thing they often neglect is to make sure that they can insure the airplane BEFORE they buy it.

Insurance companies will require the owner/pilot to have a minimum set of requirements (total flight hours, hours in make/model, tail wheel and/or retractable gear time, etc) for the aircraft.  If you are not sure what type of aircraft you are qualified for, give us a call and we can tell you right away where you stand.  If you have your heart set on an aircraft that you are marginally qualified for, we will work with you to develop a pilot training and transition plan before requesting quotes from the insurance companies which can turn a potential rejection into a reasonable price quote.

To help you navigate through the ins and outs of aviation insurance, we have put together this list of Frequently Asked Questions (FAQs) as well as an Aviation Insurance Glossary and a List of Acronyms.


Are some airplanes more expensive to insure than others?

The short answer is yes.  Some aircraft have better safety records than others.  Turbine aircraft are generally safer than piston aircraft; however, a complex aircraft needs to be piloted by an equally qualified pilot.  For some aircraft with questionable safety records there may be only one or two insurance companies that are willing to provide coverage and what they may provide could be very costly and limited.  Take into consideration the safety record of an aircraft and your qualifications in that particular aircraft, and then work with us before the purchase to ensure you have the best possible insurance coverage at the best possible cost.
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What is a Broker of Record letter?

Aviation insurance companies are dependent upon agents to produce business for their review and evaluation. They usually accept business on a first come-first served basis; meaning the agent to submit your application for insurance to a specified insurance company has the rights to that particular insurance company for a quotation for coverage. The first agent to submit anyone to a particular company is known as the agent of record to the insurance company in question. If the customer decides that he wishes to change agents then he can designate an agent with whom to do business. By signing an agent of record letter the purchaser of insurance will authorize a different agent to represent him to the insurance company. It is important to recognize that signing an agent of record letter actually terminates the current or existing agent which represents you in the market place among insurance companies.  The letter also disengages the current or existing agent and does not allow that agent to negotiate or act on your behalf after the letter activates a new relationship with the new agent or broker.  Signing an agent or record letter it is not much different than an actor hiring an agent.  From the time of hiring, the agent takes care of all negotiations and details with the parties in question.
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What should you know about your insurance company?

The reason you buy insurance is for payment of claims, therefore you should understand you insurance company’s claims payment ability and philosophy.  All companies vary in their attitude towards servicing their clients and payment of claims.  Even if we are prompt with servicing your account, it does not mean that we can always get immediate results from an insurance company.  The old theory of “you get what you pay” for holds true.  Companies with higher AM Best and S&P financial ratings can, and often do, charge a higher premium for their policies and are usually more responsive to the claims needs of their customers.
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Why do rates differ so much between insurance companies?

In most cases, it is all in the details. Every insurance contract is different, especially when it comes to coverages. Be sure to read your insurance contract to make sure you are getting all the coverage you need. In the event of a claim, the amount of your premium will be the furthest thing from your mind, what will be important to you is whether or not you were properly covered.

Also, competitive pressures in the marketplace often produce wild rate swings. Any company needing or wanting to build market share can do so by under-pricing the risk for the first year. If you have multiple quotes for your aircraft insurance and one premium amount is substantially lower than the others, you should ask yourself some questions. Does the cheaper company insure substantially safer pilots than the others (probably not)? What will happen to my insurance rate in subsequent years? What will happen to the marketplace if insurance companies are unable to sell their policies at prices necessary to pay the claims?
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How do I apply and what information do I need to gather?

You can either give us a call or use our online quote forms to start the process.  Fill out our detailed quote form if your have all of your information readily available, or use our quick quote form to get the process started while you gather your information.

You will need the following information:
  • Aircraft: year, make, model, # of seats, storage location and type (hangar/tiedown)
  • Who is Insured: named insured(s), additional insured(s), lienholders
  • Type of coverage: Aircraft Property Damage coverage, Liability coverage
  • Liability limits: Limit of liability, smooth (Combined Single Limit) or sublimits, hull value
  • Pilot(s): Total time, time in make/model, loss or incident history, certificates and ratings, most recent medical and BFR dates for each pilot
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How critical is correct information? Should I overestimate my pilot hours?

It is important to give accurate information to underwriters. It is acceptable to use approximations on such things as pilot hours if you underestimate. Many policies will make the hours and ratings given on the pilot's underwriting submission a requirement of the policy. If you over estimate your experience, you may find yourself not meeting the minimum standards set for you in your policy. If you employ a pilot, it is up to you to assure the information furnished by your pilot is accurate. Check his logbooks. 
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I'm not very familiar with the make and model of my aircraft -- am I at risk for being

rejected by the underwriter?

If the aircraft to be insured is of a make and model unfamiliar to you, work with us to develop a pilot training and transition plan before you or anyone approaches the underwriter. A strong transition plan takes the burden off the underwriter and may turn an underwriting rejection into a good quotation. Keep in mind, the underwriter is paid to accept or reject the risks as it is presented. If accepted, it is his job to price the policy and outline the coverage's he is willing to extend for that price. It is not his job to engineer the risk to make it more acceptable. That is up to the client and the agent.
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I applied for a quote and bound coverage. Why do I need to return an application

after coverage has already been in effect?

All aviation insurance companies require a new application if you are a new customer to them. This application is specifically worded with your individual effective date, your exact liability limits, your hull value, and questions tailored to your exact policy. Even if you have already started a policy, the insurance company will require an application with your information and an original signature. The application becomes part of your policy. Many insurance companies require a new application every three years if you are a current client, and others want a signed application every year.
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What types of coverage are available?

Aircraft hull insurance covers physical damage to the aircraft you own. Hull insurance can be written on a “named perils” or "all risks" basis ("all risks" is most common). The basic difference between the two is that the first tells you what causes of damage (perils) are covered and the second tells you what causes of damage are not. In the first, you must prove that the peril was covered; in the second, the insurer must prove that it was not.

Liability Coverage is the protection you have against claims arising from bodily injury or property damage for an accident that you are deemed liable. This will cover your liability for damage to the property of others that isn't in your care, custody or control, as well as bodily injury coverage to passengers or other persons who are injured on the ground or in another aircraft.
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Explain Limits of Liability – Combined Single Limit versus sub-limits

Some policies place a limit on the maximum coverage they provide for Bodily Injury and Property Damage. These "split limits" appear on the policy as separate amounts. For example: $100,000 property damage, $100,000 bodily injury, $200,000 each occurrence. This is an older form of liability coverage and most insurance companies no longer write "split limits."

Combined Single Limit coverage, also known as "smooth limits," combines your coverage for both Property Damage and Bodily Injury per occurrence into a single limit with no further limitation. In other words, regardless of whether the claim against you arises from injuries or death to persons or from damage to other's property, the amount of protection you have is the total Combined Single Limit. It is usually expressed as a single number, for example: $1,000,000 each occurrence. In general, this type of coverage provides more protection when compared to sub-limited coverage, but it is also more expensive.

The most common liability coverage is a sub-limited coverage. Sub-limited liability coverage is also Combined Single Limit coverage, but it places a limitation on your coverage for a specific loss in the form of a lower amount than the each occurrence amount. Most commonly, these sub-limits apply to all or a type of Bodily Injury. For example, $1,000,000 each occurrence limited to $100,000 per person places a maximum amount of coverage for death of or injuries to any person at $100,000. This amount is part of, and not in addition to, the $1,000,000 each occurrence limit.

Sub-limits may also be worded on a per passenger basis. This wording provides superior coverage over the per person wording since it only reduces coverage on passengers. A per person limit reduces your coverage for bodily injury to all persons.
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What limit of liability do I need?

Each individual's situation is different. Liability Coverage is the protection you have against claims arising from bodily injury or property damage . These can range literally into millions of dollars. The higher limit of liability you buy, the more expensive it can be. In general, most insurance professionals will advise you to purchase the highest limit of liability that is available and that you can afford, since "pinching pennies" on this coverage could leave you responsible for the amount of loss which exceeds the limit you bought.  That question is best answered by looking at your overall aircraft operations.  Do you carry passengers often?  If so, what kind of passengers are you carrying?  Do you only carry family members?  If the answer is yes, then maybe you would be comfortable with a lower limit than if you were carrying high net worth clients.  We normally advise our clients to buy as much liability as they can reasonably afford and/or a limit that will make them comfortable.  In the current aviation insurance market, it is often difficult to meet both objectives.
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Are legal costs included?

Unless specified in an Underwriter's policy we always work to ensure our client’s legal defense costs are included in any policy even if your limits of liability have been exhausted by the payment of judgments or claims.
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What is medical payments coverage and should I have it?

This coverage pays the immediate medical expenses for injuries sustained in an accident. It also covers injuries that occur while entering or leaving the insured aircraft. Most insurance companies offer medical payments coverage on their liability policies. It is usually written in limits ranging from $1,000 to $15,000 per person, and depending on the policy, it may or may not cover the pilot. Because its purpose is to pay for initial medical treatment, most policies have a time limit on the medical services provided. It is considered "no-fault" insurance, which means liability does not have to be established for medical payments to be made. Carrying medical payments coverage on your policy is a good idea because it covers the smaller injury claims without filing a claim against your bodily injury liability coverage. Additionally, it can pay expenses not covered by your personal health insurance.
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How much should I insure the aircraft for?

The important thing to remember is that almost all aviation insurance policies are "stated" value policies.  In other words, if you decide to insure your aircraft for $100,000 and the deductible on the policy is $100 and you experience a total loss of the aircraft, the insurance company will pay you $99,900.  So, it is extremely important to insure your aircraft for its replacement cost.  So ask yourself, if I had a total loss tomorrow, could I replace my aircraft for what I have it insured for? Sources of current aircraft value information are aircraft sales magazines and aircraft price guides. These are only a guide however, since aircraft condition, options, avionics and equipment can vary greatly. We should be able to assist you in determining a range suitable for your aircraft. Finally, remember aircraft physical damage coverage is usually written on an "agreed value" basis. This means that you and the insurance company will agree on what amount will be paid to you in the event of a total loss.
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What are the problems of overinsuring or underinsuring an airplane?

When you are determining the amount of hull insurance to purchase, keep the market value in mind. If the insured value is lower than market value and the aircraft is even slightly damaged, the insurer may decide to pay you the entire insured value. The insurer could then repair the damage, sell the aircraft and make a tidy profit. They can do this because any aircraft declared a total loss belongs to the insurance company and it is the insurance company's sole prerogative to decide if an aircraft is a total loss. This would leave you without an airplane and not enough money to replace it.

If the insured value is higher than the market value, it could probably be repaired at a lower cost than the value it is insured at, no matter how badly damaged your aircraft is. This would mean that, rather than paying you off for the wreck in the field, the insurance company would repair it because they would save money to do so. So you are left with an aircraft with major damage history.  The other negative is the opportunity cost of the additional premium you have been paying to insure the aircraft for the higher amount.  This is not to say that you can never insure an aircraft for more than the "blue book" value. If you have special equipment installed, or the aircraft is in better than average condition, you may be able to push for a higher insured value. The insurance company will probably require you to substantiate your request, however.
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What changes will increase the insured value of my aircraft?

Here are some prime examples:
  • An engine overhaul
  • New paint or interior
  • New avionics
  • Conversion/modification kits (i.e., engine, STOL)
There are some limitations to increasing the aircraft's insured value. If you purchased $10,000 worth of avionics, don't expect the insured value to be increased by that amount. In this example, an insurance company may only increase the value by $5,000 to $7,000.
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How is the insurance premium determined?

There are four primary underwriting elements when it comes to airplane insurance; pilot, airplane, purpose of use, and location. These components are the first stops in the underwriting process. Each insurance company uses different criteria to determine your premium. Some of the most common factors include logged flight experience, aircraft make and model, limits of coverage, whether the aircraft is hangared, possessing an instrument rating, claims-free experience, deductible, and how the aircraft is used. The insurance company then applies prior experience in these various "classes" of business to predict future results, and the premium is determined.
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How can I reduce my insurance costs?

Of course, it depends on your insurance company, but here are some possible methods:
  • Obtain an instrument rating
  • Keep the aircraft in an enclosed hangar
  • Participate in a pilot proficiency program (i.e., the FAA's Wings program)
  • Increase your flight time
  • Maintain a claim-free status for a certain period of time
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Can I buy a short-term policy?

Unfortunately, no.  A short-term policy does not exist.  The aviation insurance industry only offers a 12 month annual policy.
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Who can fly the plane?

Only those pilots that are specifically named on the policy or pilots that meet all the requirements of the Open Pilot Warranty can fly the aircraft and still be covered. Do not allow anyone to take dual instruction in your aircraft that is not specifically approved by your insurance company.
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What is an Open Pilot Warranty?

This is a clause in the policy that lays out the requirements for pilots who fly the aircraft other than those specifically named in the policy. The fact that a pilot is either named on the policy or meets the requirements of the open pilot warranty means that the policyholder has coverage under the policy, provided that the pilot's use of the airplane was within the scope of the policy. It does not necessarily mean that the pilot is covered by the policy's liability provisions.
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If I let someone borrow my aircraft, what precautions should I take?

If the borrower isn't a named pilot on your policy, make sure he/she meets the requirements of your policy's open pilot warranty. This should be confirmed by reviewing the individual's pilot logbook. In other words, make sure the logged flight time meets the open pilot warranty. Also verify that he/she has a current medical certificate and biennial flight review.
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Can I let someone borrow the plane and charge them for using it?

This can be a very critical issue.  Please read your insurance policy in detail or check with us to verify what your policy allows.  Insurance policies vary on this, but in general some companies do allow for reimbursement of some costs associated with the flight, like gas and oil. The broadest form of reimbursement allows for reimbursement so long as no financial profit is made. This might not seem like a big issue at first, but violating your policy with this issue will quickly put you in jeopardy with your insurance company.  Please advise us about any arrangements you may have for reimbursement so this can properly be addressed with your insurance company.
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Will my policy cover me if I rent or borrow someone else’s airplane?

Most policies provide liability coverage for the use of non-owned aircraft, and depending on the company, it may or may not include physical damage coverage, Be aware that non-owned coverage will only apply in certain situations. With most policies, this coverage applies anytime you use a non-owned aircraft, but only if you or you and your spouse are the policyholder. It can also apply to your use of a non-owned aircraft when your aircraft is down for maintenance. Because most people are unaware that this type of coverage exists on their policy, take the time to review this part of your policy. If you don't understand the coverage and how it applies to you, contact us for assistance. 
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I am buying an airplane with another person.  Are there any special considerations?

Insurance is one of the critical aspects of co-ownership. It covers the cost of the airplane if it’s damaged, destroyed or stolen. It protects your own assets if your airplane causes damage to someone’s property. An improperly insured aircraft can wipe out the life savings of all co-owners and create a lifetime of problems. Remember that all co-owners are liable for the actions of one. In addition, the underwriters will rate the policy based on the qualifications of the least experienced pilot flying the aircraft. If one of the partners is a low time or transitional pilot for the aircraft desired there may also be added training requirements imposed for that individual. The experience of the least experienced pilot will also drive the availability of higher liability limits for the policy
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Can I buy a plane and insure it as a student pilot?

Yes, just make sure we have complete details and qualifications of both you and your instructor or flight school. We cannot stress this point enough. It is much easier to obtain aircraft insurance—and may save some money—if the underwriters have all the details about you when we contact them for a quote. Without this information, the insurance company must make assumptions as to your qualifications, and this point alone may cause them to get a declination, or a higher price.
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Is my flight instructor covered by my policy?

Airplane insurance policies generally state that an “Insured” is the Named Insured and anyone else that is flying the airplane with the Named Insured’s permission, using the airplane for an approved use, and either meets the Open Pilot Warranty or is a named approved pilot. The definition of an “Insured” goes on to say: “If the named pilot or person meeting the Open Pilot Warranty is in the business of commercial aviation, and it specifically mentions flight instruction, then the extension of insurance coverage to the pilot does not apply.”

First, to make sure the airplane owner’s insurance is valid and intact we must make sure the flight instructor is a named approved pilot. This only works to the benefit of the airplane owner, but it is important so the airplane owner’s insurance is not impaired in any way.

Second, the Flight Instructor can obtain insurance protection by being named as an Additional Insured on the airplane owner’s insurance. This only extends liability insurance, though, and does not address the potential of subrogation (legal recovery action) for physical damage (hull) insurance by the insurance company.

There is another option, keeping in mind that the instructor still needs to be a named approved pilot on the owner’s airplane insurance unless meeting the Open Pilot Warranty. If the owner does not wish to add the instructor as an Additional Insured with a Waiver of Subrogation, or the instructor will not reimburse the airplane owner for the expense of extended coverage, then the next option is for the instructor to secure their own insurance through a CFI non-owned insurance policy.
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Where can I fly my aircraft and be covered?

Most aviation insurance companies include coverage for the United States, Mexico, and Canada.  A few companies exclude coverage for operations in Alaska so be sure to check your policy or call us for clarification.  Also, if you are planning a trip to Mexico, the Mexican government requires proof of a separate liability policy issued by a Mexican insurer.  So in order to avoid complications and other penalties possible under the laws of Mexico, including possible impoundment of your aircraft, you will need to secure a separate liability policy issued by a company licensed under the laws of Mexico. We may be able to do this as an endorsement on your current policy, or we can direct you to another company that can do this for a reasonable fee.
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Do I need a separate policy for my hangar and its contents?

No, in most cases you can add an endorsement to your aircraft policy to include liability and contents coverage for your hangar for an additional fee.
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What happens if I have a claim?

Provide the insurance company with any documents that they request (aircraft logbooks, pilot logbooks, estimates, photographs, sworn statements, etc) as promptly as possible. You will be an integral part of the claims settlement process, make sure you and your adjuster are communicating regularly. The most frequent cause of a delay in the claims settlement process is that the insurance company did not receive previously requested documents from the insured.
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What would cause my claim to be denied?

Answer all questions and requests for information truthfully and accurately. A misleading statement or false information on an application could result in a claim denial.
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How does an insurance company determine a “total loss”?

Some companies declare the aircraft a total loss when the estimated cost of repairs exceeds a certain percentage (i.e., 70%) of the insured value. If a company does not use a percentage, they will usually declare an aircraft a total loss when the estimated cost of repairs and the aircraft salvage value (the damaged aircraft's value prior to repairs) exceeds the insured value. After the aircraft has been declared a total loss, the insurance company will pay the policyholder the insured value, less any deductible. After payment has been made, the insurance company will retain the salvage. An aircraft that has been stolen or disappears will be considered a total loss if it is not found within a specified period of time.
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Will my rates go up after a claim?

That depends on many factors. We cannot adequately address all possible scenarios here. It is fair to say however, that in most cases aircraft insurance companies do not surcharge for a claim, especially if it was not pilot related. The risk is either acceptable to them or not acceptable to them. Premium surcharges are unlikely to do much in the way of recovering aircraft accident claim costs. If a pilot shows particularly bad judgement (e.g. runs out of fuel) then the insurance company may be unwilling to renew or may offer coverage only at a much higher premium level. It is also possible for the renewal premium to increase even if the insurance company did not attach a claim surcharge because aircraft insurance rates change all the time.
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What is a Breach of Warranty Endorsement?

A lienholder on an aircraft may require this in addition to the right to be paid directly in the event of a loss. Basically, the breach of warranty endorsement provides that if you perform an act which voids the obligation of the insurance company to pay on your behalf (such as allowing non-approved pilots to operate it), the company will pay the amount of the lien to the lienholder, but will require reimbursement from you.