What you need to know about aviation insurance: Insights from the General Aviation Expo

What to consider before buying aviation insurance 

The main coverages available for private pilots are aircraft hull protection, which covers physical damage to your aircraft, and aircraft liability, which covers third-party damage and bodily injury legal liability. 

Transport Canada requires all private pilots to carry liability insurance. There are two main types of liability insurance that you can purchase: Public liability for property damage and bodily injury to third parties, and passenger liability coverage for property damage and bodily injury to passengers. 

When purchasing aviation insurance, private pilots need to consider the type of aircraft that they are going to be flying, their experience versus the aircraft’s performance, what they are going to use the aircraft for, the training that they need for that aircraft, and how they plan to store the aircraft. If you are a renting a hangar or tied down space, the landlord may require you to carry a certain premises liability limit or require to be added as an additional insured. 

The importance of insuring your aircraft for its fair market value 

We recommend that you insure your aircraft for the fair market value. If you over-insure your aircraft, you will be spending more on premium than necessary. 

If you underinsure it, it can become an issue if you have a claim and the repairs come in close to the value of the aircraft. In this situation, the insurance company will likely consider it as a constructive total loss, keep the salvage, and sell it. You will be out of an airplane and only receive the value that you agreed upon on your insurance policy, which can be disadvantageous if you have underinsured your airplane. 

Making sure your aircraft is correctly valued on your insurance policy is not only a concern for pilots with newly purchased aircraft, but can also affect pilots who have had an aircraft for a long time, who have not been updating the agreed value of the aircraft on the policy. 

Especially since repair costs have increased substantially recently, it is important that pilots review annually that the value they are putting on their policy is current with the market. 

Higher settlements for certain passengers 

In accidents involving high net worth passengers and/or American citizens, the settlements may be higher. If you are putting high net worth individuals into your aircraft, you should think about increasing your liability limit. 

Keep in mind, if the claim exceeds the liability limit that is on your policy, the injured party or estate can sue you personally. With US citizens, you can get called into the US courts regardless of where the accident occurs. The US is very litigious, and awards are much higher. 

Common policy exclusions and causes for denials of claims 

It is crucial to thoroughly review your policy so that you know what parts, people, and activities will be covered in the event of a claim. For instance, Loss of use, wear and tear, weight and balance issues, and life-limited parts are common policy exclusions. Passenger liability coverage will also be excluded if the number of passenger seats on board the aircraft exceeds the number of passenger seats stated in the policy. 

To avoid a claim denial, insureds must comply with the provisions laid out in their policy. When an insurer underwrites an insurance policy, they agree to provide coverage, terms, and conditions for a specified premium, based on certain conditions and risk information provided at the time of purchase or renewal. Any deviations from them may be seen as a material change in risk and have serious implications for your insurance coverage. 

Some common examples include: 

Change in use. When we present the risk to an underwriter, we let them know what you are doing with your aircraft, such as chartering and renting. If you go outside of that use, the underwriter will view it a material change in risk that they did not take into consideration when quoting it. Even on policies with the wording “use as approved by the named insured”, there are limitations, such as exclusions for illegal use of the aircraft. 

Flying outside the territorial limit. All insurance policies have a territorial limit listed. If you take your aircraft outside of this area without first disclosing it with your insurer, you are at risk of misrepresentation. 

Unauthorized pilots. Depending on how your policy is written, if you put a pilot on your plane who hasn’t been listed on the policy, that’s cause for denial of a claim. Policies may have other stipulations for what makes a pilot authorized to fly, such as at the time of the occurrence, the pilot must have a valid current pilot’s licence and medical certificate with all aircraft type ratings and endorsements required by law for the flight. 

Modifications to the aircraft. If you have made any upgrades or modifications to your aircraft, you need to let your broker know in writing that you made a change to your aircraft configuration, so that it can be correctly rated as such and endorsed on your policy. 

By following the conditions outlined in their policy and reporting any material changes in risk as soon as they occur, private pilots can help ensure they will be sufficiently protected in their time of need. 

Who can fly your aircraft 

It depends on how the policy is written. For instance, your policy may be written on an “approved pilot” basis, where all pilots must have prior approval by the insurer and be named as an approved pilot on your policy. 

Alternatively, if you have an open pilot warranty clause on your policy, the insurers have trusted you to ensure any pilot flying your aircraft is qualified to do so. However, if you allow a student pilot to fly your plane, this can be considered a material change. 

Policies may also automatically allow qualified instructors to fly your aircraft. — however, this is allowed only while providing instruction to a named pilot on that policy. They cannot fly the aircraft for their own leisure. If you would like them to be covered for this under your policy, you will have to add them as a named pilot. 

What to do in the event of a claim 

As soon as it is safe to do so, you must contact your broker or insurer and provide them with the pertinent information, which typically includes: 

• the nature and place of the occurrence 
• the aircraft involved 
• the name of the pilot 
• the extent of injuries to persons and damage to property 
• the name and address of any witnesses 
• the name and telephone number of a contact for further information. 

It is also important to not 

• act in any way detrimental to your insurer 
• make any statement without your insurer’s permission, unless the statement is made to a government official 
• pay or make any promise to pay amounts to any person 
• assume or admit any liability without your insurer’s permission 
• allow further loss or damage to the aircraft