How to Save Money on Aviation Insurance

** Illustration by Chris Gall**

A few years back, a Cessna 172 pilot had trouble starting his airplane and decided to hand-prop it near the Typhoon restaurant at the Santa Monica airport. No one was inside the Skyhawk. The engine spun up, and the airplane made a solo trip across runway 21. In the process, it made a business jet go around and entered a hangar on the other side of the runway. The propeller proceeded to chop up the fuselage of a Beechcraft Baron that was parked inside the hangar.

At the time, an annual insurance policy on a Cessna 172 would have been around $1,000. The claim was likely in the hundreds of thousands. There are not many products you purchase that you hope to never use. But insurance truly fits that profile. And the owner of that Skyhawk was likely very happy to have it.

The old adage that says insurance is expensive until you need it is also true, and it is hard to determine what having enough coverage means. If it were a jet that the 172 chopped up instead of a Baron, the claim may have exceeded the $1 million limit that is so common in the industry. With a bad policy, you could lose everything. With too much coverage, you are wasting your dollars. The key to finding the right policy at the best price is getting the right insurance provider to guide you.

The Industry

There are many options in the aviation insurance world. There is everything from direct underwriters to major brokers to local mom-and-pop agents. About a dozen underwriters provide general aviation insurance. Some of the major players include AIG, Global Aerospace, Starr Aviation, Phoenix Aviation Managers and USAIG. Major brokers include AOPA Insurance Services, Falcon Insurance and Hardy Aviation Insurance. There is also one underwriter you can purchase a policy from without a middleman — Wichita, Kansas-based Avemco.

Many underwriters will quote only a specific risk to one broker, a system referred to as locking rates, which makes it difficult to shop around. The aviation insurance business is quite specialized, so you will likely get good service from whichever broker you decide to do business with. However, the right broker could save you money and headaches in the event of an accident. More on that later.

If you need aircraft insurance today, the news is good. According to Jan D’Angelo, former vice president and branch manager at Chartis Aerospace, a prolonged period of low claims, particularly in the commercial world, and a relatively high amount of available capital have increased the number of companies offering GA insurance. Companies, such as Britt Paulk, Aggressive Aviation and QBE, entered the market in the past decade with very competitive offerings. As a result, some pilots are paying less for their aircraft insurance policies than they are for their automobile coverage. An insurance policy that I paid $1,025 for in 2007 is now quoted at around $850 under the same conditions. Rate reductions appear to have exceeded 10 percent across the board, according to several industry experts. For jet owners, that adds up to thousands of dollars in savings.

Another reason for the lower rates, according to Bill Snead, the president of AOPA Insurance Services, is that computer-based quotations are now offered by some companies, making the quoting process quicker and more efficient and increasing the competitive pressure between companies. Computerization is also starting to eliminate rate locking.

However, Snead feels the market is beginning to turn. “That could either mean the insurance companies are feeling that there is less capacity and less need to compete on a price-only basis, or frankly, it could mean they are not making enough profit or any profit, and they simply have no choice,” Snead says.

Finding the Right Broker

Just as it is important to find the right real estate agent when you purchase a home, it is important to find the right insurance broker for your needs. You are likely in good hands if you contact one of the major brokers. But a local agent may give you more personalized service.

“When I write someone a new insurance policy, I like to go out and check out the plane and go fly with them, if possible,” says Jerry Clemens, owner and founder of Clemens Insurance Agency in Parsons, Kansas. Clemens doesn’t do that to get a free flight. He may learn something about his customer that he wouldn’t have learned as an agent on the other end of a phone line. When the time comes to renew the policy, Clemens automatically shops around to make sure he provides the customer with the best possible rate.

If you own an unusual airplane, you should turn to a type club, such as the MU-2 Aircraft Owners and Pilots Association, Pilatus Owners and Pilots Association, or the American Waco Club. These clubs are likely to have a few suggestions on brokers that can provide you with the best quotes for your situation.

Once you have selected an agent, provide him or her with very detailed information. This will result not only in the best quotes but also a policy that is right for you. “The last thing you want to do is to buy a policy that doesn’t cover what you need to have covered,” Snead says. “The insurance company doesn’t want that, the agents don’t want that, and the owners don’t want that.”

The number of hours you have spent flying different types and classes of airplanes is one of the main factors that contributes to what limits of liability you can qualify for, what rate you will pay or whether you will qualify for insurance at all. But there are other elements that may factor into the quote. What you use the airplane for and where you fly make a difference. International flights, for example, may require additional insurance. Generally, policies cover everything but listed exceptions, so read the fine print. Mike Adams, the vice president of underwriting at Avemco, suggests obtaining a sample policy before committing to a contract.

Technical airplanes, such as the Pitts, typically warrant higher rates because they pose a higher risk for the insurance companies. Again, there are certain companies that specialize in those types of airplanes. New companies, however, may not yet be educated enough to know the difference. When Aggressive Aviation Insurance emerged a few years ago, the insurance on Clemens’ Pitts went from about $3,200 to about $1,500 per year. Unfortunately, that rate was not sustainable. But at least Clemens saved a significant amount of money for a few years.

Questions to Ask your Agent or Broker

  • •When you shop for agents, you should ask them a few simple questions to get an idea of whether the person on the other line or other side of the desk is somebody you feel comfortable doing business with.
  • •Do you work in all aviation insurance markets available in the state?
  • •Can you offer discounts for membership of the type club and other industry organizations I am a part of?
  • •Do you specialize in any particular area of general aviation?
  • •Do you automatically shop my rate when it comes time for renewal?
  • •Are you able to provide a sample policy for me to review?
  • •What makes policy A better than policy B, and why should I avoid policy C?
  • •Give me an example of a policy you've written for a situation that is similar to mine.

Ways to Lower Your Premium

For pilots, there are several behaviors and actions that insurance companies have identified as good indications of low risk, and these will reduce your premium — sometimes by as much as 10 percent. Check in with your insurance provider before each renewal to update him or her with any information that may provide you with new discounts.

Regular Training: Studies show that pilots who regularly participate in some type of flight training are less likely to have an accident or incident than those who don't. While the cost of training will likely exceed the insurance discount, the benefits are immeasurable. In some cases, as with jet and turboprop aircraft owners, recurrent training is required in order to maintain coverage.

Avemco has a safety rewards program that provides an annual premium credit for customers who do any FAASTeam WINGS pilot course, as well as for those who go up with an instructor annually. Where you get your training can also make a difference. Participation in training programs at highly respected facilities, such as FlightSafety or SimCom, will result in the best rate.

New Ratings: Adding new ratings can also help with insurance costs. "On many of the aircraft Avemco insures, an instrument rating almost always gets an annual premium credit,"

Adams says. “Depending on the complexity of the airplane, a commercial certificate versus a private certificate may be worth a credit or two.” The recent acquisition of an airline transport rating could get you a further discount. Any added ratings, even a seaplane rating, obtained during the policy year could qualify you for as much as a 10 percent credit with Avemco under the company’s safety rewards program. However, additional training or ratings are required to qualify for credits in subsequent policy years.

Hours: The more you fly, the lower your premium — up to a point. Hours in type also matter. In some cases, you may need to fly with an instructor for 25 hours or more, depending on the complexity of the airplane, before the insurance policy will cover solo flight.

Hangar Parking: While parking your airplane in a hangar will increase your cost of ownership, the reduction in your insurance premium will pay for some of that additional cost.

Partnership: One way to save a lot of money, not only on insurance but also on the general ownership of your airplane, is by entering into a partnership. Most companies allow up to three pilots to be named on your policy without any additional cost. However, the policy rate will be dictated by the least experienced pilot. You likely wouldn't want to partner with an inexperienced pilot, but you can pretty much rest assured that if your insurance company is willing to insure a pilot for the same cost as you alone, he or she is probably a safe bet.

For partnerships where each partner owns less than 20 percent of the aircraft, there are some ways around high hull premiums that would result from a partner with little flight experience. Each individual owner could pick up a nonowned policy. If necessary, each partner can also purchase liability coverage beyond the partnership’s limits.

Flying Clubs: Getting a deal for flying clubs can be difficult because the club must generally cover a broad scope of pilot experience. But there are good rates to be had. The Aircraft Owners and Pilots Association has a new program that is based on the number of active members. "There may be 20 people in the club, but if only five of them are flying, the insurance rate is based on the five members," Snead says. Also, as a member, you don't need a nonowned aircraft policy unless you want higher liability limits or fly airplanes outside the club.

Aircraft Rentals: If the only airplanes you fly are rentals, there is a chance that you don't need to purchase any insurance. Ask the rental company two questions: Am I named as an additional insured on your policy? Is there a waiver of subrogation when I fly your airplanes? If the answer to these questions is yes, you don't need insurance. However, in a lot of cases, the answer will be no. If you need to purchase a nonowned aircraft policy, you may need only enough coverage for the deductible or a limited amount of liability insurance to cover yourself over and above the limits of the FBO's policy. But you may also need hull insurance.

Figure Out What Makes the Most Sense: You will have to determine if you need to buy enough insurance for the most expensive airplane you fly or the one you fly most regularly

Association Membership: Members of trade associations or type clubs may qualify for discounts of several percentage points. If you own a jet, that discount could add up to hundreds, if not thousands, of dollars.

Lower Liability Limits: Lowering liability limits is one way to save money on the policy premium. But even if you think your liability exposure is not very high, there may not be a significant savings in reducing liability coverage. If you don't have any assets, you could consider going without liability insurance, since the damaged party and the insurance company are unlikely to go after someone from whom nothing can be recovered. However, some consider it a moral obligation to carry liability coverage.

Don't Crash: The biggest thing you can do for your insurance rate is maintain a claim-free record. Hopefully, you will never have to make a claim on your insurance policy. But if one day you have a landing mishap or do something silly, such as let your airplane take off on its own, a good insurance policy will back you up. It is up to you to make sure you have just the right amount of coverage without paying too much for it.

Life Insurance for Pilots

You are probably aware that general aviation activities are excluded from life insurance policies and that you have to pay extra premiums in order to be covered. Group policies often exclude GA, so if your employer provides life insurance, you will likely require a separate policy. Make sure you provide the agent with information about what types of flying you do and what types of aircraft you fly. There are, for example, policies that cover certified GA aircraft but not experimental ones. You also need to have a discussion about how much coverage you need based on your number of dependents, debt level and other factors.

You can choose either a term life policy, where the price is set for a period of time as long as 30 years, or a more expensive universal policy, which covers you until you reach a certain age, generally 99 years. Since the term life has a lower annual premium, it may make the most sense, but be aware that if you live past the expiration of the term, you can expect much greater premiums if you still need coverage.

There are four rate levels that are associated with life insurance: super preferred, preferred, standard plus and standard. If your agent tells you: “You’ve qualified for standard plus,” it is not necessarily a good thing. Often pilots don’t qualify for super preferred. With nearly 200 companies providing personal life insurance, rates for a $1 million policy, which is a common coverage level, vary greatly. Quotes can range from about $1,150 to $5,000 per year for a 45-year-old pilot, so shopping around is definitely worthwhile.

Being a member of an association may help. AOPA, for example, offers competitive rates for its members. The Pilot Insurance Center in Addison, Texas, specializes in pilot-specific life insurance. By meeting certain criteria, such as no prior at-fault aviation accidents or FAA violations and having an instrument rating, 250 hours of total time and five calendar years of experience, you can qualify for the much desired super preferred rates. Bill Fanning, co-founder of the Pilot Insurance Center, claims that, through this program, his rates come out as much as 20 to 30 percent lower.

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Pia Bergqvist joined FLYING in December 2010. A passionate aviator, Pia started flying in 1999 and quickly obtained her single- and multi-engine commercial, instrument and instructor ratings. After a decade of working in general aviation, Pia has accumulated almost 3,000 hours of flight time in nearly 40 different types of aircraft.

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