Flight Plan: Consult an Aviation Insurance Expert Before Purchasing an Aircraft

March 23, 2022

Buying a private aircraft is not a transaction to enter casually.

First, just because you can afford to buy an airplane or helicopter doesn’t necessarily mean you can afford to own one. Aircraft ownership has many hidden costs — including Aviation Insurance — and, cumulatively, those costs can turn out to be prohibitive.

Second, even if you can afford to own an aircraft, that doesn’t necessarily mean you should be flying it. Money can’t buy the knowledge or experience it takes to fly a complex plane; serious study, a requisite number of training hours and favorable conditions are required.

That said, owning a private aircraft can have multiple benefits: efficiency, cost-effectiveness, comfort and – foremost, if you’re a pilot – the sheer joy of flying.

Owners of private aircraft can be classified into four basic groups:

  1. Those in the business of flying, providing services such as transportation, flight instruction, crop dusting, photography and more.

  2. Extensive travelers for whom ownership is cost-effective.

  3. Pilots — amateur or professional — who fly their own plane or helicopter primarily for pleasure.

  4. People with a lot of money to spend. (More on this group in a bit.)

If you own or are contemplating the purchase of a private aircraft, multiple factors determine what types of insurance coverage you need to protect yourself and your investment. Working with an agent or broker who specializes in Aviation Insurance is the best way to customize coverage to fit your unique needs and circumstances.

Aviation Insurance Basics

As aircraft tug manufacturer Mototok observes, there are five essential types of Aviation Insurance:

  • Third-Party Liability — This coverage protects you against claims made by owners of property damaged by your aircraft during landing or in a crash.

  • Passenger Liability — This provides compensation if passengers on your aircraft or injured or killed during a flight. Rates are determined by how many passengers the aircraft can hold.

  • Ground Risk-Hull Not in Motion — Even when it isn’t flying or rolling, your aircraft is susceptible to damage. This covers claims resulting from a hangar fire or collapse, wind, hail, lightning, theft, vandalism or animal damage.

  • Ground Risk-Hull in Motion — This covers damage that occurs during taxiing, parking or towing.

  • In-Flight — Despite its name, this protection is comprehensive, covering damage that occurs in flight or on the ground.

Some carriers offer Combined Single Limit Insurance, which includes both passenger and public liability insurance under one premium.

Other coverages are available for hangars, support equipment, avionics and more. How you use the aircraft and other factors – age of the aircraft, age of the pilot(s), flight hours, safety ratings and more — determine what solutions you require and what your rates will be.

Great Plane, Under-Prepared Pilots

The level of risk involved in flying a private aircraft is, of course, among the primary reasons Aviation Insurance is expensive. And, naturally, risk tends to be inversely proportional to a pilot’s experience and preparedness.

Consider the history of the Beechcraft V-Tail Bonanza, aka “The Doctor Killer.”

As General Aviation News reported in a 2017 story about the plane and its infamous nickname, the Bonanza presented a technological leap when it debuted in the mid-20th century, and many pilots — especially wealthy professionals such as doctors and lawyers — were unprepared for the transition from flying an Aeronca Champ or Cessna 140.

“And as you know, in general aviation aircraft, there are often going to be people who are flying airplanes for which they are not properly trained or they try to fly them in an environment for which it is not certified and capable of withstanding,” Thomas P. Turner, executive director of the American Bonanza Society Air Safety Foundation, told General Aviation News. “And so we ended up taking a class of people epitomized by physicians, putting them into a high-end airplane epitomized by the Bonanza, and every now and then, when there’s a crash, there’s a pretty good correlation between those two categories.”

Some aircraft-related errors are merely expensive. For example, one amateur pilot who traded in his single-engine plane for a multi-engine model did so without informing his insurance agent and promptly crash-landed the new craft. The pilot survived, but the plane did not, and when the owner did contact his insurance agent, he learned that the policy covering the old plane did not apply to the new one.

Insurance, the owner later admitted, was the last thing on his mind when he bought his new toy. It should have been the first.

In a case with a far happier ending, an owner who did consult with his agent about his purchase of a new plane had the misfortune of seeing the hangar in which he stored the aircraft destroyed in a windstorm two days after he bought it. Afraid that his policy might not have gone into effect so soon after the purchase, he was thrilled when his agent handed him a check from the insurance company, in an amount that enabled him to replace the wrecked plane.

Ukraine Fallout May Further Harden Market

As many insurance consumers are aware, the industry is three years into a hard market for Property and Casualty (P&C) coverage – a phenomenon created by the combination of:

  • Increased frequency and severity of claims resulting from weather- and climate-related disasters such as wildfires, hurricanes and tornadoes;

  • Social inflation and a trend in so-called “nuclear verdicts” in liability lawsuits;

  • The exponential growth in cybercrime, including attacks aimed at the aviation sector;

  • Uncertainties arising from the COVID-19 pandemic.

These developments have led to increased insurance rates and retentions, reduced capacity and heightened underwriting scrutiny in processing applications — all explained in Alera Group’s Property and Casualty 2022 Market Outlook, including breakdowns according to industry and line of coverage.

Since the publication of the Market Outlook in December 2021, a new factor has emerged: Russia’s war on Ukraine. According to the credit-rating agency Fitch Ratings, insurers and reinsurers face a worst-case scenario of up to $10 billion in claims due to Russia’s seizure of planes owned by U.S. and European leasing companies — a move made in retaliation against international sanctions imposed on Russia since it invaded Ukraine in February.

Such a complex — and costly — set of circumstances underscore the importance of consulting with an insurance professional who knows aviation and understands the insurance market.

Why Alera Group?

An independent firm with more than 130 offices around the nation, Alera Group includes a specialty Aviation Insurance brokerage, Roy Neal, which has been in operation since 1962. Our team includes insurance professionals who are also experienced pilots, and who work closely with aircraft owners to provide customized solutions – asking all the right questions and providing highly informed advice.

Wherever you take off and land, there’s an Alera Group office nearby, offering local services along with the national scope that gives you access to specialists such as the aviation risk consultants at Roy Neal.


About the Author

Jeremy Barbee

Commercial Risk Consultant

Roy Neal, An Alera Group Company

Jeremy Barbee is a Commercial Lines Risk Advisor focusing on Aviation Insurance. He works with clients on all types of aviation insurance needs, including personal, commercial, aerial applicators, flight schools, drones and more. Jeremy has a true passion for aviation and loves talking about flying with his clients. He is a private instrument-rated pilot whose preferred plane is a Cherokee 6, but he loves talking about all types of airplanes. One of his favorite parts of his job is working with clients as they get new airplanes because of the opportunity it presents to learn more about aviation.

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