Brokers Versus Insurance Companies

There are two different players when it comes to aviation insurance – the broker and the actual insurance company. A broker (such as Gallagher) works for you (the aircraft owner), not the insurance company; we act on your behalf by being your advocate. For this reason, you want to make sure you are working with a broker that specializes in aviation, has history in the insurance industry, and most importantly, knows Cirrus aircraft. An experienced and long-standing broker tends to have more pull and better relationships with the underwriters at the insurance companies.

You also want to be sure you are using a broker that specializes in aviation and not one that may only have a few aviation policies. If they do not do enough aviation business, there is a good chance they will not have access to all the markets (underwriters) or any aviation markets at all. When these non-aviation insurance brokers have clients with aircraft, most of the time they will call another broker who specializes in aviation to get the quotes for their client. Now you are dealing with two middle men, which can lead to more room for error.

The insurance company will be the one that underwrites and backs your policy. When you receive quotes, you should receive a proposal from your broker that outlines several insurance companies and the differences between them. Not all insurance companies are the same and the lowest price may not always be the best option for you. You want to look for a financially strong insurance company who has great service and a good policy. Some insurance companies have broader policies that offer expanded coverages and others may lack in coverage or have a history of poor service. Your broker should point these out to you and not always push you to the lowest priced option.

When reviewing your insurance policy, it can seem overwhelming to read so if you have questions or need items clarified, reach out to your broker, that is what they are there for.

What goes into determining the policy premium?

There are several factors that come into play, the value of the aircraft, the liability limit and the pilot’s experience.

Determining the value to insure the plane:

Aircraft insurance policies are written on an “agreed value” basis. This means that you and the insurance company agree to insure the aircraft for this amount and if there is a total loss, this amount is paid to you minus any deductibles. There will be a “Not in Motion” and an “In Motion” deductible. Since a percentage of the charged premium is based upon the value, you may think that you should insure it for a lower value to save money, or a higher value for more options in the event of a loss. Neither of these are a good idea. If you place too low of a value on the aircraft and it receives damage, the insurance company could decide to total the aircraft. Now you are left with a loss payout check for an amount that doesn’t allow you to go out and buy a replacement aircraft. If you over-insure the aircraft and it’s severely damaged, you would want it totaled but the cost of repairs may not exceed the high value, so you are now left with a damaged aircraft with loss/ repair history.

Liability coverage:

This coverage is to protect you against other parties suing you for damages or bodily injury that your aircraft may have caused. Do you understand the liability options that are being offered to you? There is a passenger sublimit option and a smooth limit option.

The sublimit option is typically $1,000,000 per occurrence for property damage, and bodily injury with a per passenger limit of $100,000 (or above). What this means is that your passengers in the aircraft are each limited to this sublimit amount. This amount will not go far in a bad injury claim. If you have three passengers and they each collect $100,000, you have $700,000 remaining for any property damage or bodily injury done on the ground.

The smooth limit option would be $1,000,000 (or above) combining single limit for property damage and bodily injury including passengers. Since there is no sublimit, the passengers inside the aircraft could collect more, but remember everything is still pulling from the $1,000,000; if you have three passengers and cause extensive property damage, the $1,000,000 will get used up quickly. If available, you should always go with a smooth limit at or above $1,000,000. Note: If you are a lower time pilot the smooth limit may not be available until you have more experience. There are also additional medical payments added to the liability coverage that range from $3,000 to $10,000, including the crew. This coverage also covers the owner. The medical payments are used alone for a quick payout for minor injuries, so the liability limit is left untouched. It can be also be added to the liability payout.

Pilot experience:

This is the last factor that determines the cost. The insurance company will want to know your pilot ratings and certificates held. They will also want to know your experience, including, but not limited to, total logged hours, if you have ever had any aviation claims, how many hours you’ve flown in the last 12 months; if you have any Cirrus experience, and have you gone through Cirrus-specific training? Most carriers require that the pilots have done initial Cirrus factory training. If you haven’t, they will require it. Your medical and flight review also need to be current. If you are flying under the new basic medical rules, you will need to be sure you are following those guidelines. Also, be aware that some carriers may still require a full medical for some situations like a special issuance medical or if you are over a certain age. Confirm with your broker to be sure. If you have had a loss of medical, it will generally follow you for three-to-five years and some insurance companies may choose not to insure you until that time has passed.

In summary, it is important to remember this information when you are comparing your premiums. There are multiple reasons why your friend could be paying more or less than you are.

This article was initially published in the JANUARY / FEBRUARY 2018 issue of COPA Pilot.