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Does An Accident Mean Higher Insurance Costs?

By Bob Mackey, representative for the EAA Aircraft Insurance Plan, Administered by Falcon Insurance Agency

February 12, 2009 — Ever see the commercial that coins the phrase, “accident forgiveness”? It begins with a car accident, followed by images of the at-fault driver shaking his head with a bewildered look on his face. Up comes the official spokesperson to tell you how his insurance company will not raise your premiums after one accident, and that you should “do business with us!”

So, is this for real? If you have an accident that results in a claim will the insurance company raise your premiums? I can’t speak for car insurance, however I can tell you that if you have an accident with your airplane and there’s a claim, the answer is a definite…maybe.

One of the nice aspects of aircraft insurance is that for the most part it’s still a people business. The insurance company still uses underwriters who examine individual risks to determine how much the premium should be…or maybe whether the insurance company should offer insurance terms at all. So when there’s been a accident with a claim, an underwriter will review all the facts, receive input from the insurance agent, and very likely take into consideration what the airplane owner has done since the accident (i.e. recurrent or refresher training and other self-improvement steps).

If the accident results in a significant claim, this will definitely impact the insurability and the cost of insurance. There’s a saying in the aviation insurance business: “More premium does not make a bad risk better.” For example, say the company normally charges $1,000 to insure a private pilot in a “Belchfire 42,” but the owner/pilot has made two off-field landings due to fuel exhaustion in the past four years, resulting in a total of $100,000 in insurance claims.

Even if you charged 10 times the premium - $10,000 - it’s still not a very good risk. So it’s not just the dollar amount but also the nature of the accident that drives the future cost of insurance. Any accident that is the result of recklessness or carelessness is not going to go over very well with the insurance company.

I once helped an EAA member who was having difficulties securing insurance after a gear-up landing as well as another incident that resulted in an FAA violation for flying into IMC with no instrument rating. I was able to negotiate an arrangement where insurance would be available at a slightly higher price; however the pilot/owner was required to attend a three-day, high-performance aircraft course on an annual basis. Further, the pilot/owner decided on his own to obtain his instrument rating.

With the course, additional training, and instrument rating, the insurance company wound up with a much better risk…and not by simply charging a lot more premium dollars.

In the event of an accident:

  • Secure the airplane from further damage
  • Get all the facts
  • Don’t assume any responsibility or admit fault
  • Contact the insurance company or your insurance agent
  • Don’t try to hide any facts from the insurance company, and
  • Do whatever you can to assist the insurance company.

We know stuff happens. That’s one of the reasons we buy insurance. Be smart, be safe, and make sure if something happens you cooperate with the insurance company.

If you need assistance with your aircraft insurance you can find the help you need with the EAA Aircraft Insurance Plan. Call 866-647-4EAA (4322), or go online to submit a request for an insurance quote, visit www.eaa.org/insurance.

Bob Mackey is a Senior Vice President with Falcon Insurance Agency and he works with the EAA Plan and NAFI Plan. If you would like to see a specific topic addressed in a future article you may send your recommendation to Bob at bmackey@falconinsurance.com

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