TOP 10 AVIATION INSURANCE MYTHS
Whether you own the airplane you fly, rent an airplane or fly a friend’s airplane, you need to read this so you may become a better-informed consumer. The following information is specific to Avemco Insurance Company in many cases, so it is important to check with your insurer to see if they apply.
Myth 1: All policies are the same. While there may be similarities in different aviation policies, there may also be some significant differences. Aviation insurance is not as highly regulated by the states as are some products such as personal auto or homeowners, so it is risky to assume that all insurance companies offer identical definitions, terms, conditions, or exclusions in their policy. Reviewing the Coverage Limits Page (sometimes called the “Declaration or Dec Page”) is important, and understanding the rest of the policy contract is equally important.
Myth 2: Policyholders can be on the hook for attorney costs. As alluded to in Myth #1, the devil is in the details. Avemco covers all costs to defend you, even if a plaintiff rejects an offer to settle and you’ve reached your limit of liability. This is generally true of all insurers, although some exceptions may exist. If you are unsure about your policy you need to check with your insurer.
Myth 3: Insurance companies don’t want to pay claims. We’ve all heard stories about insurance companies looking for loopholes (aka fine print), and there is an assumption insurance companies work to find ways to avoid paying claims. At Avemco the reality is the opposite, if there is a question we try to find coverage. You do have to be careful about things that can flat out nullify coverage, such as lying on your application or letting your policy lapse/expire.
Myth 4: If my friend names me on their policy, I’m covered. That depends on the policy definition of who is insured. The policyholder is always insured under the definition in the policy and there can be situations where someone other than the policyholder is an approved pilot which is different than being an insured pilot. If you are an approved pilot, your friend, who is the policyholder, is insured while you are flying their plane. But you may not be covered under your friend’s policy meaning you have to defend yourself in the event of a mishap. If you are both an approved and insured pilot (commonly the status under the Avemco policy) then both your friend and you are insured while you are flying their plane.
Myth 5: I installed new avionics so I should increase my hull insurance. Don’t assume everything you do to your airplane will increase its value. The prudent action is to contact your insurance company and report the changes. If the value of the aircraft has increased (using a commonly accepted valuation guide such as Vref) then yes, you should increase your hull value so you are properly insured.
Myth 6: I can save money by insuring my airplane only for the loan amount. Unlike cars, airplane insurance policies are based on “stated value.” That is, you and the insurance company agree when the policy is issued what the airplane is worth. That value is listed on your policy data or declarations page. The policy will also stipulate the conditions of when the aircraft becomes a “total loss.” If you insured your airplane for too little, you could find your airplane being declared a “constructive total loss” and by the policy contract you are paid the value shown on the data page and the insurance company owns your plane. If undervalued you will be short the funds needed to replace your plane.
Myth 7: If I violate the FARs, the insurance company won’t pay the claim. Speaking for the Avemco policy, the Federal Aviation Regulations and our insurance policy have absolutely nothing to do with each other. The policy will pay unless the insurance conditions specifically were violated.
Myth 8: The FBOs policy covers me when I rent their airplanes. It is unlikely you’ll be covered under a flight school’s insurance, even if they told you that you are covered. The school’s insurance company may come after you under subrogation and for loss of use as well as for liability exposure for injuries to people and damage to property other than the airplane you are flying.
Myth 9: My non-owner policy covers my friend when I fly his/her airplane. A non-owner policy insures only you as the policyholder for liabilities you incur (you are found negligent in the event of a mishap) while flying a non-owned aircraft. So if you are flying your friend’s airplane and the engine fails through no fault of your own and the airplane is damaged, your non-owners policy won’t cover the damage.
Myth 10: I can pay my friend for my use of their aircraft. You need to check your friend’s policy to see if any payment is allowed and if allowed for what and is there a limit on the amount. Your friend receiving payment from you for the use of their plane may be an exclusion in their policy. Avemco offers this coverage; other insurers may as well, but it’s important to check.
So get out your policy, read it, and take a minute and pick up the phone to contact your insurance company to ask any questions you have. You might be glad you did.
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Avemco® does not provide technical or legal advice, and is not affiliated with companies whose products and services are highlighted, advertised, or discussed in content contained herein. Content is for general information and discussion only, and is not a full analysis of the matters presented. The information provided may not be applicable in all situations, and readers should always seek specific advice from the FAA and/or appropriate technical and legal experts (including the most current applicable guidelines) before taking any action with respect to any matters discussed herein. In addition, columns and articles solely reflect the views of their respective authors, and should also not be regarded as technical or legal advice.