Money-Money (Insurance Things to Think About Today!)
By Bob Mackey, representative for the EAA Aircraft Insurance Plan, Administered by Falcon Insurance Agency
November 20, 2008 — As our nation — and the world — continues on this economic roller coaster, you might guess that I’ve heard from lots of airplane owners with questions about their airplane insurance. Some even talk about reducing their insurance coverage, or even dropping their insurance altogether. Before you consider such moves, make sure you have a clear picture about the real-world consequences such drastic measures can have.
For instance, dropping the in-motion hull (physical damage) insurance on your airplane could lower your annual premium anywhere from 1 to 2 percent of your airplane’s total value. But if you lower your annual premium by $1,000 by dropping in-motion coverage that comes out to about $84 per month. When you look at it on a monthly basis, the premium becomes a more reasonable number in comparison to the value of your airplane.
You could lower the amount you are insuring your airplane for but here I must caution you to be extremely careful. If you underinsure your airplane you could find yourself with a constructive total loss after an accident. This occurs when your airplane is repairable, but the cost of repairs, together with the salvage value, is greater than the insured value. Therefore the insurance company may declare your airplane a “constructive total loss” and pay you the insured value. Bottom line: you end up losing the amount by which you uninsured your airplane.
My advice is to simply make sure the insured value of your airplane is an accurate value based on its current market value to get the maximum insurance for your money.
One more thought on the insurance point. In the past several years the aviation insurance market has experienced an increase in capacity, (i.e. more insurance companies offering insurance for airplane owners). This increase, or “supply,” coupled with a relatively stable “demand,” has cause a softening in the aviation market. This softening has not been across the board and has also varied by type and use of aircraft. In some cases, large commercial accounts have seen drastic reductions in what they pay for insurance. On the other hand some airplane owners have only seen slight reductions, or “as expiring” renewals with no increases in premium. The bottom-line is that airplane insurance is still a very good investment when you consider the insurance coverage and defense costs you receive with liability insurance and the value of hull insurance for your airplane.
Before you blindly reduce your insurance or drop coverages make sure you have discussed all of the details with your agent and that you clearly understand the savings vs. the change in protection. Frankly, in these times of economic uncertainty, now more than ever is when we need to protect our fixed assets!
Another comment I’ve heard form airplane owners is that they plan to cut back on their flying. Here again I want to caution you before you decide to close the hangar door and not maintain your airplane and your flying skills. Typically insurance companies will set their premiums higher for pilots who fly less as opposed to pilots who maintain a reasonable level of proficiency. In addition, if your airplane sits in a hangar for extended periods of time you may be causing damage to your bird, including some things that could cause an engine failure or other malfunction when you do get back in the air.
My advice is to design a schedule to fly between three and five hours every month. Studies show that flying between 36 and 50 hours annually, spread out evenly throughout the year, will maximize your skill retention and also be best for your airplane. Also, when you do go flying make sure you get a minimum of one hour on each flight. Short flights just around the pattern will not do you much good and it will definitely hurt your airplane, which could be asking for a mechanical problem down the road.
The ups and downs of the economy will likely take a while to smooth out. Don’t add to your problems with an underinsured or uninsured loss, or a loss that could have been avoided.
If you have any questions about your airplane insurance or if you want to check out the EAA Aircraft Insurance Plan to see what we can do, you can go online to request a quote at www.eaainsurance.org or give us a call at 866-647-4EAA (4322).
Happy & Safe Flying…Always!
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