Trying to buy insurance without knowing something about it yourself can sometimes be like flying blind -- you know for sure you'll fetch up somewhere, but that's about it. A good relationship with an agent or broker means that you should be able to ask questions about your coverage and how it is placed and get answers that give you a better understanding of your protection and how it is obtained. Most aircraft owned by individuals falls under the "pleasure and business" class of insurance. The basic coverages available under this class are aircraft hull and liability.

Aircraft Hull

Aircraft hull insurance covers physical damage to the aircraft you own. This is different from the property damage covered under liability insurance; property damage covers your liability for damage to property of others that isn't in your care, custody or control.

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.

This type of insurance is subject to a deductible. Large aviation policies have only one deductible dollar amount that applies, but most pleasure and business policies provide for at least two deductibles: either in motion/not in motion or in flight/not in flight. Gener ally, the higher the deductible, the lower the cost of the insurance. If you have a lienholder on your aircraft, they may specify maximum deductibles. Deduct ible amounts should represent the maximum out-of-pocket loss you can afford on an aircraft.

Policies differ in what constitutes each type of deductible. For example, in some policies, an aircraft may be considered "in motion" and therefore subject to a higher deductible unless it is at a complete stop. Others may consider an aircraft "in motion" after it commences a takeoff roll and until it completes a landing sequence.

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 in surer 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.

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 tangle of metal in the meadow, the insurance company would repair it because they would save money to do so. 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.

One important thing to note about hull insurance is the function of the 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.

Breach of warranty coverage is purchased in the amount of the lien, but this shouldn't necessarily equal the amount of hull insurance; otherwise you're opening yourself up to underinsurance. Aircraft Liability Liability insurance covers your legal liability to others. If you are held responsible for an act covered by the policy, the policy usually will pay on your behalf, although there may still be a few policy forms out there that will simply reimburse you. In its most basic form, liability covers bodily injury and property damage arising out of the use or ownership of the aircraft.

You can obtain liability insurance in a variety of different forms:
1. Bodily Injury and Property Damage excluding Passengers -- Under this coverage, even if there were passengers aboard the aircraft who were injured, the insurance company would have no responsibility to pay for their injuries, leaving the burden of payment directly on your shoulders. This is the least expensive option, and should be pursued if you have a one-seater and/or don't let others fly your aircraft.
2. Bodily Injury and Property Damage limited to $X per Passenger -- Under this type of coverage, any passengers who are injured or killed are limited to a maximum recovery under the policy. If the passengers or their estates don't feel the limit was adequate compensation, they then have the right to come after you for the rest. Common passenger liability limits are $100,000 or $300,000, due to high medical costs.
3. Combined Single Limit Bodily Injury and Property Damage -- This can be written either including or excluding passenger liability. This is the best form of protection to buy because it allows the policy limit to be paid out as it may be needed rather than having limitations on how much can be paid to each passenger, how much can be paid for damage to property of others, etc. This is the most expensive option, but it is also the most flexible.

Because of the possibility of a high liability award, you should carry at least $1,000,000 in coverage. This may seem like a lot, but non-aviation type juries tend to figure that anyone who can afford an airplane can afford to pay through the nose in a damages award. 800-851-2997

Higher Limits of Liability

If you're very well off, if you fly in affluent areas of the country, or if you sometimes carry affluent people as passengers, you may want to carry higher limits because of the possibility of higher awards due to economic status. If you do carry higher limits, there are a couple of different types of quotes you should get.

First, ask your insurance professional to quote a higher limit within the same policy you have. This may sometimes be more expensive, but it does offer the convenience of only requiring one renewal each year. You may also be eligible for some discount on the higher limits because you've got them with the same insurance company, and it also facilitates claims handling. One of the tricks of the trade that insurance people use to get the best deal possible for higher limits is called "layering," either with your primary carrier or another company. In this method of buying insurance, you would purchase several layers of insurance which add up to the amount you feel you need. Each layer will cost less, based on the theory that smaller losses occur more frequently than larger losses. Insurance companies with higher layers figure they simply have less chance of being called on in the event of loss.

If you are using the layering method, however, BE CAREFUL. If possible, get what's known as a "following form." Under this type of policy, the excess policy raises your limits and follows the wording of your policy exactly.

If you don't get a following form, have your insurance professional make sure that there are no gaps or overlaps in coverage. This problem can arise when the excess policy doesn't cover something important in the primary policy, or when the excess policy requires a higher limit than you have in the primary policy. You'll be responsible for the difference if this happens! Overlaps occur when the excess policy will operate above a lower limit of primary insurance or when certain events are covered twice (you'll only get paid once) .

Medical Payments and Personal Accident Insurance

As always, there are other types of protection you can buy. For example, Medical Payments coverage acts as a type of no-fault coverage. Regardless of whether your acts caused an injury or the other person's own carelessness led to injury. Medical Payments will pay up to a certain amount of first aid and medical treatment rendered to that person within a specified period of time (usually one to two years). Common limits range from $500 to $10,000 per person. Aircraft crew can be included or excluded from Medical Payments benefits. When selecting Medical Payments limits, remember to keep current health care costs in mind.

Personal Accident (PA) is a handy, low-cost coverage to have on hand. Basically it is an Accidental Death and Dismemberment coverage that will cover you while you're flying, unlike most life or health insurance policies This coverage is extremely flexible and can be tailored to a wide variety of coverage limits and types of coverage Unlike the other coverages we're discussed, it is unavailable in a standard hull and liability policy, and must be purchased from an agent or broker who is licensed to obtain this type of insurance.

Policy Warranties

When you "warrant" something in an insurance application, you are promising that it is true to the best of your knowledge -- and if you go against your promise, the insurance company doesn't have to pay. Your signature on the application warrants that you haven't misrepresented yourself to the insurance company, but the policy itself contains two warranties.

The pilot warranty and territorial limits are requirements to keep coverage in force rather than a statement of truth. Both impact your insurance rates. For example, it is more expensive to have a worldwide policy territory than one that is for the United States only because you are likely to be more knowledgeable about flying in your own country than in others.

There are two types of pilot warranties: Open Pilot Warranty (OPW) or Named Pilot Warranty. Under an OPW, the underwriters state the minimum acceptable pilot qualifications (such as type of ticket, number of hours total time, etc.) for anyone flying your aircraft. The higher the qualifications, the lower the price should be. A Named Pilot Warranty states the names of the people the insurance company has approved to fly the aircraft. All things being equal, the Named Pilot Warranty is less expensive than an OPW because it is more restrictive.

The insurance company, contrary to popular belief, isn't telling you who can fly your aircraft in a pilot warranty. They're telling you that, given the amount of premium you've paid, this is the most risk they're willing to take in terms of the pilot(s). Most insurance companies will be more than happy to charge you more for less-qualified pilots, but the cost may be more than you're willing to pay.

You should note that if the pilot in command at the time of the loss doesn't meet the pilot warranty, the insurance company has absolutely no obligation to pay, regardless of whether the PIC caused the loss or not. The same goes for where the insurance company provides coverage. Many pleasure and business policies will pay for losses when the aircraft is operated in the United States (excluding Alaska), Canada and the Bahamas or while enroute to those areas. If you're outside the territory when you go down, you're out of luck as far as getting any money from the insurance company. Check with your agent or broker if you plan to fly outside these areas, and purchase the appropriate insurance. Mexico and Canada both require liability insurance if you will be flying to a point in their respective countries.

It is always advisable to carry all applicable insurance. Even though the cost of liability insurance, hull insurance and special endorsements may not have been something you counted on when you got your warbird or classic jet, they carry a benefit beyond paying out policy limits for covered events -- they also pay for your defense costs if a suit is initiated against you. This may be of even more benefit than the liability payments, because the cost of defense is covered even if the suit is a frivolous one, or one in which you are ultimately determined to not be liable.

A word about nonstandard airworthiness certificates: be sure your policy is endorsed to specifically cover the type of certificate you hold. The standard wording of most policies precludes coverage if the certificate is other than standard, so read your policy carefully, and have your insurance professional show you that coverage exits.

Other Considerations

Because of the technical nature of aviation, it is considered a specialty field within the insurance industry. The majority of the agents and brokers placing aviation insurance do so on a primary or even full-time basis. If your agent or broker is not a specialist, chances are that he or she may not know all the options available to you or have access to the insurance company that may be best for your needs.

Even the most knowledgeable specialist may be unable to give you the service you deserve. Before you write next year's check, think for a moment: Were you given plenty of time to make your decision about renewal? Were you given several quotes or just told what the price would be? Were your questions answered in a useful way or did you just get more jargon? Were requested changes made promptly? Was everything in the policy right? Did you request certificates of insurance that never got to the people that required them? If you had a claim, was it settled fairly and promptly? Were there any unwelcome surprises lurking in your policy? You'll want to know if your insurance company is financially stable so it can pay claims if they come up. You'll also want to know how good its policy form is, in terms of the broadness of its terms, definitions, conditions and exclusions. Admittedly, sitting down in the evening and reviewing your insurance policy has a much lower enjoyment factor than punching holes in the sky, but if you find even one area that is unacceptably restrictive, the time is well spent.

As you read the policy, made sure that all the information about you and your aircraft is correct. If it isn't, run - don't walk-to the phone and let your agent or broker know what changes are needed. As you review the policy, see if each section makes sense. If it doesn't, you should get some answers. It could be that the section you have a question about can be modified to meet your needs better. Once you find an insurance company you like, stick with it! Believe it or not, most insurance companies repay loyalty with flexibility and consideration for their insureds.

The Final Analysis

Unfortunately, there's no instrument rating for insurance buying. If you can't see it in the policy, it's not there. You should know what you want, what you need and how to tell if you got it. A good policy can literally be worth more than its weight in gold when you really need it.