October 31, 2013 - Aircraft insurance isn't very complicated. It is different than your auto or homeowners insurance, though we can point to a few common denominators.
First, insurance companies are in the business to make money - that is, take in more money than they pay out. Second, insurance is highly regulated: Each state has a governing body that oversees insurance to ensure citizens are treated fairly. Lastly, insurance is an open market where competition keeps all the insurance companies and agents working hard to gain and keep policyholders.
Aircraft insurance has more hands-on underwriting than auto and homeowners insurance, which are highly computer-driven. Aircraft insurance has some, but not much automation due in large part because there are very few aircraft compared to automobiles or homes.
I've been asked many times over the years what the secrets are to getting the least expensive insurance. My pat answer is in the form of a question: "Do you want cheap insurance or do you want the right insurance?"
In my book, "cheap" insurance is synonymous wasting your money. The right insurance is what each individual policyholder needs. What one policyholder needs may be completely opposite of what the next policyholder needs. You need the right insurance at the best price, not the cheapest insurance.
To achieve this, you need to have an insurance agent that is knowledgeable, listens to you, and understands your objectives.
Here are some tips regarding the purchase of aircraft insurance.
Never say never until you are certain it is never.
I occasionally see people who have been told by another agent that they cannot get insurance - after only one consultation. While there certainly are some challenging situations that may end up being uninsurable, you and your agent can't know this for sure until all possibilities have been exhausted. Unfortunately, I learned this the hard way.
An airplane owner called me looking for coverage and I told him in our first conversation that it would be impossible to get aircraft insurance based on his situation. A few days later he called me back telling me he had found coverage with another agent. So I lost a potential client forever. This airplane owner would never bother calling me again.
I vowed that I would henceforth exhaust all possible avenues before telling other potential clients they can't get insurance. Make sure you are working with an insurance agent who will not give up until they are certain it is never.
Look before you leap.
This is one of the most important things any new airplane owner should remember. Don't buy an airplane, or even start building an airplane, until you are certain you can find and afford aircraft insurance. Again, find yourself an aviation insurance professional who is knowledgeable and understands you and the aircraft and get quotes to see what's available, what the restrictions or limitations may be, and the cost.
Even the best agent in the world can't fix lack of planning. It's frustrating for both agent and owner when insurance is unattractive, limited, or costs too much. Quotes are free, so open your eyes and look before you leap.
Know your options.
You have numerous choices when it comes to the aircraft insurance market. A good agent will make sure you know all of the options so you purchase the right insurance at the best price.
When it comes to aircraft liability insurance, you may need higher insurance limits, or you might be okay going with a lower limit to save some money. For aircraft physical damage insurance, you can take the risk completely on your own by self-insuring, with aircraft liability insurance only. This will save you a significant amount of money. On the other hand you may want to consider ground-only aircraft physical insurance (not-in-motion, or including taxi), or all-risks aircraft physical insurance (flight, taxi, and ground). The more risk exposures you decide to cover with insurance, the more you will pay for the aircraft physical damage insurance.
I always tell airplane owners to do their own risk assessment: Identify all of the possible risks for what could happen to your airplane, determine those you can prevent or mitigate, and determine your own personal comfort level for those you can't.
For example, you can substantially reduce and possibly eliminate the risk of running out of fuel if you always make sure you have full tanks before every flight and you never go past half tanks before landing for more fuel. On the other hand you may not be able to significantly reduce or eliminate the risk of a tornado if you happen to live in a part of the country where thunderstorms and tornados are more likely to occur.
Make sure your aviation insurance agent helps you to know your options and the associated costs so you can make sure you get the right aircraft insurance at the best price.
Looking back to my first tip, you may have a challenging situation when you go to buy aircraft insurance. You might find that you cannot get aircraft physical damage insurance or you may be required to complete several hours of dual instruction (transition training), which may require a few more flight training dollars than you planned to get aircraft insurance.
If you build a one-of-a-kind airplane with an auto engine conversion that you developed yourself, I can pretty much tell - but not absolutely - that you won't be able to purchase aircraft physical damage insurance. I can also tell you, but again not for sure, that student pilots in some homebuilt airplanes may be difficult or cost a little or maybe a lot more to get aircraft insurance. Be flexible when it comes to transition training and what insurance coverages may or may not be available.
Pick the right agent and pick only one!
Pick an aviation insurance professional who will listen to you and understand your insurance objectives and you will get the right aircraft insurance at the best price. If you pick an aviation insurance professional who is knowledgeable about aircraft insurance you get all the options, you will be confident you are buying the right insurance, and you will not waste money.
Calling a bunch of different agents will not help you save money or buy the right insurance. If you don't know whom to contact, ask other airplane owners if they're happy with the job their agent is doing for them. You can also seek advice from other agents before they start looking for quotes to present to you. Once you decide, you'll be ready to work together to get the right insurance at the best price.
Contact the aviation insurance professionals with the EAA Aircraft Insurance Plan administered by Falcon Insurance Agency at 866-647-4EAA (4322) or visit the EAA website to request a quote.
Bob Mackey is senior vice president of Falcon Insurance Agency Inc., the official administer of the EAA Aircraft Insurance plan. Bob has more than 35 years' experience with aviation insurance and is a commercial- and instrument-rated pilot. If you would like to share any comments with Bob, e-mail him at firstname.lastname@example.org.