'Going Naked' Not Very Smart for Aircraft Owners
By Bob Mackey, Vice President, Falcon Insurance Agency, Inc.
Do you know who writes a lot of insurance policies, perhaps more policies than anyone? Nobody! That's right, many people don't buy any insurance on their homebuilt, standard, helicopter or gyro, seaplane, warbird, vintage, or airport. Why? Some say insurance costs too much. Others don't buy insurance because they believe insurance companies will do anything they can to avoid paying claims. But these arguments are not, in fact, fact; they are 100 percent fiction. As an insurance agent working for the airplane or airport owner, it's my job to arrange good insurance that will protect my clients from the risks they are concerned about.
Some people self-insure. Self-insuring means that you have the financial ability to pay your own legal obligations. Large businesses and individuals with substantial wealth can afford to self-insure, however for the majority of airplane or airport owners it's just not possible to do this. On the other hand, "going naked," or simply refusing or ignoring the responsibility to purchase insurance, isn't smart.
Let's take a look at what you get when you buy insurance, as well as the rare occasions when insurance may not be available.
A private pilot with a single-engine land rating and 100 hours decides to buy a $150,000 Piper Aztec (twin). The pilot has no multi-engine rating and no instrument rating. You might think insurance is not available in this instance, but it is. Expensive, yes, but this situation is insurable with a sound aviation insurance company.
What about a student pilot in a helicopter? Insurable. Older pilots? Insurable again. Of course, there will most likely be stipulations, such as dual instruction requirements for the student or low-time pilot, until a designated number of hours are achieved and appropriate ratings are acquired, or for the older pilot maybe an annual BFR and/or Medical. Regardless of what some folks may say, these situations can be insurable. It just takes a lot of work on the agent's part to arrange insurance coverages, which some agents don't want to do. And, yes the premiums may be substantial or the stipulations may require time and money on the part of the pilot/owner, yet insurance can be arranged.
What about cost? Normally the liability portion of an aircraft insurance policy constitutes about 20-30 percent of the total annual premium. Hull insurance is the larger portion making up the remaining 70-80 percent. Assuming the liability insurance premium cost between $300 and $1,000 what do you get for these dollars?
You get two things: indemnity, which is payment of your legal obligations arising out of your ownership and operation of your airplane; and defense - attorneys and legal experts - who represent you and the insurance company in the legal proceedings, both before and during any litigation that may arise as covered by your insurance. Attorneys and legal experts are expensive, so defense, in addition to the ultimate possibility of a settlement paid on your behalf, makes the $300 to $1,000 look like a pretty good buy.
Hull insurance pays for damage to your aircraft that can be purchased at varying levels, such as ground-only, ground including taxi, and full coverage for not-in-motion and in-motion claims. If you're considering "going naked," this is the insurance you may want to consider reducing or dropping altogether. But before you do that, put your risk manager hat on first.
Dropping in-motion insurance coverage may reduce the cost initially, but it may result in a large, out-of-pocket repair charge later. Or you could experience damage you can't afford, leaving you out of the airplane ownership arena for a few years.
Buying insurance is a cost-vs.-benefit decision. When one considers the potential size of a liability claim, I don't know how going naked can be justified. On the other hand, dropping parts of the hull insurance may work depending on your own personal situation. Sit down with your agent and examine the insurance costs vs. risk so you can make an educated decision. Whatever you decide, don't base your decision on rumors and hangar-flying talk. Your insurance agent is a professional whose responsibility is to help you make the best decision based on your personal circumstances.
Falcon Insurance Agency is the exclusive administrator for the EAA Aircraft Insurance Plan and we take our responsibilities to our clients very seriously. We'll explain all your available options to make sure you're getting the right insurance at the best price…even if your situation is one of those difficult-to-place risks.
Are everyone and every situation insurable? No, but the aviation insurance specialists at Falcon Insurance Agency will do whatever it takes to help you with your aviation insurance needs. If you don't have insurance on your aircraft, call us today at 866-647-4EAA (4322). Or visit www.eaainsurance.org and submit the online quote request form.
EAA INSURANCE TIPS is a special EAA Member benefit. If you have an insurance related topic you’d like to see addressed or if you have any comments, please email firstname.lastname@example.org. If you need an insurance quotation call 866-647-4EAA (4322).