It's Checkout Time ...
By Bob Mackey, Vice President, Falcon Insurance Agency, Inc.
Has your insurance agent ever said you needed to do something in order to qualify for insurance coverage? Maybe you had an old, large tree right next to your house and your agent said the company wanted you to cut the tree down before they would insure your house, property, liability, and contents. Or perhaps your aviation insurance agent said you would need five hours of dual instruction before you could fly solo or carry passengers because you didn't have any time in the make and model airplane you were planning to buy. Welcome to checkout time!
Now you are probably saying, "Wait a minute. I've got plenty of fight time; I'm totally legal as far as the FAA is concerned, with the exception of the FAA take-offs and landings currency requirement, so why do I need five hours of dual before I'm allowed to fly solo or carry any passengers?" Let's dig into the insurance company required checkouts issue.
First, an insurance policy, regardless of the kind-auto, home, boat, airplane, etc.-is a contract between you and the insurance company. You agree to pay some money (premium) to the insurance company and the insurance company agrees to pay for damage to your airplane as well as defend you and pay your legal obligations in the event you are determined to be responsible for injury or property damage. Exclusions and conditions are spelled out in the policy wording or in endorsements attached to the policy. In addition, the insurance company establishes basic parameters relating to the insurance it provides, such as approved pilots and purpose of use for the airplane.
Airplane insurance is one of the last forms of insurance that still uses the old-fashioned method of analyzing each individual risk. This is a very good thing! In the underwriting process, an underwriter can either decline to provide a quote, quote high, or provide a quote subject to certain requirements, like the homeowners insurance company requiring you to cut down that big old tree. With airplane insurance, the underwriter may feel he has only one chance to reduce the company's risk exposure from the outset by requiring some additional training before being exposed to the bigger risk of passengers, thus the requirement for dual instruction. Checkouts are not new; ever since insurance companies started writing insurance for airplane owners they have required various amounts of checkout time for pilots transitioning into new airplanes.
Here are a few illustrative examples:
" A private pilot has 200 hours of pilot-in-command (PIC) time mostly in a Cessna 172. This pilot wants to buy a Cessna 182. The insurance company recognizes the transition for this pilot into the Cessna 182 is reasonable, however it has paid many $15,000 claims for firewall and nose gear damage when pilots unfamiliar with the heavier aircraft don't get some kind of check-out before they solo. In this situation, the underwriter can decline to quote; quote a much higher premium than normal hoping to get enough premium on all transitioning pilots and aircraft to cover all the potential incurred losses; or issue a slightly higher-than-normal quote stipulating that the pilot get an adequate checkout, such as five hours of dual instruction, with hopes that the pilot avoids damaging the new airplane in the first few hours of flying.
"Another example: a private pilot with an instrument rating has 1,000 hours of PIC time several different airplanes, but no tailwheel time. He wants to purchase a Gullwing Stinson worth $150,000. Most insurance underwriters will decline to quote this risk and those who do will require considerable dual instruction, probably 20 hours, with a highly qualified tailwheel instructor as well as a tailwheel endorsement. The reason? The underwriter wants to minimize the risk of paying a claim within the first few weeks the insurance policy is in force because the initial exposure during transition is larger.
Finding a qualified instructor for a Gullwing Stinson is one thing, but what if the airplane is a brand new homebuilt? EAA addresses this issue with its EAA Flight Advisors Program, which provide pilots with adequate preparation before building and flying their aircraft. Insurance companies working with EAA agree to provide first-flight coverage if pilots-builders utilize the EAA Flight Advisors Program. While a major breakthrough, EAA Flight Advisors only helps pilot-builders recognize what they need to do to get prepared. There are no rules that say the pilot-builder can't go out and make their first flight without additional training, even if recommended coming out of the EAA Flight Advisor process. If a pilot-builder goes looking for insurance without some level of experience in the airplane they are going to fly, the underwriter will require some level of dual or orientation flight time before they provide insurance.
The pilot-builder of a new homebuilt airplane needs to anticipate getting ready for his first flight long before finishing the project.
Say your friend buys a kit for a popular airplane and over the next two years proceeds to build the airplane to perfection. He's a private pilot with 200 hours of total time, mostly in a Cessna 172 and a Piper Warrior. The project, like many homebuilt airplanes, is expected to be very light in the controls and will cruise around 180 knots with a constant speed prop. Also, your friend hasn't been doing any flying while building their airplane.
Now your friend starts talking about making the first flight. What do you do?
If you are like most of us we've had an experience when we ask ourselves, "Is he ready for that first flight?" We might suggest that he look into the EAA Flight Advisor Program and we also might suggest he see if he can fly with someone with a like airplane to get ready for the first flight. If it's not possible to get flying time in the same make and model airplane being built, time in other homebuilts with similar speeds and flight characteristics will go a long way in getting ready for a safe and successful first flight and getting insurance coverage. Many kit manufacturers have a network of pilots willing to take other builders for a ride to provide some level or orientation. EAA, again working with the FAA, secured an exemption, which allows CFIs to provide dual instruction in their own homebuilt airplane for a charge to pilots preparing for transition into a homebuilt airplane.
Everyone building an airplane, or planning to transition into an airplane significantly different from the airplane they have been flying, should get ready for their own good and to help get insurance. Also, please remember every situation is different. There isn't a magic number of flight hours. It's experience! Be prepared to show you have flown airplanes similar to the airplane you've built, light on the controls, fast, slow, tailwheel, retractable, float-equipped, whatever. If the underwriter sees you as a pilot with little or no experience in the type airplane you want to insure, expect to go and get some dual or orientation time before obtaining insurance.
Plan ahead! Talk to other people building an airplane like yours and if at all possible, go flying with them. The experience will help you. And if you can find a CFI that owns a homebuilt and is willing to give you dual in their homebuilt, do it. It will help!
So, why do insurance companies require dual or orientation time? The insurance company wants to insure you but they don't want to pay a claim they think has a good chance of happening in the first few hours of flying.
Do yourself a favor. Contact the insurance specialist at Falcon Insurance Agency. Falcon is the official insurance agency for the EAA Aircraft Insurance Plan and they can help you plan for getting the right insurance regardless of what kind of airplane you own. You can reach contact Falcon Insurance Agency at 866/647-4EAA (4322). Whether you are buying a Cessna 182, Gullwing Stinson, or building your dream airplane.
EAA INSURANCE TIPS is a special EAA Member benefit. If you have an insurance related topic you’d like to see addressed or if you have any comments, please email firstname.lastname@example.org. If you need an insurance quotation call 866-647-4EAA (4322).