Determining the right amount to insure your aircraft for isn’t straightforward. If you over-insure or under-insure the value, you’re going to be paying more both ways. Aircraft insurance policies are not like car insurance policies in the way you value the asset. Aircraft insurance policies are ‘stated value’ policies, which means the insurance company values your aircraft based on the value stated in the policy – regardless of the actual market value.
How to Determine Your Aircraft’s Value
Reviewing publications such as “Trade-A-Plane” or other online resources can help you determine an appropriate insured value. Looking through the ‘Aircraft Bluebook’ is another good way to determine if the value you’re asking for is appropriate or not. If the value you determine is too far from the ‘Aircraft Bluebook’ your insurance underwriter will ask for justification.
What justifies Additional Aircraft Value?
- Total time on the airframe
- Total time on the engine(s)
- Any upgrades that have been made like new paint, interior, upgraded avionics, and new engines.
Why is Accurate Insured Value Important?
After you file a claim the insurance company will use the stated value to determine if your aircraft should be repaired or deemed a total loss. Both over-insuring and under-insuring can have consequences.
Over-Insuring: If you over-insure, the insurance company may be put in a position that repairing a substantially damaged aircraft make more financial sense, when you might have wanted the aircraft totaled. Even if the repairs take months or years, there is nothing in the policy that prevents the insurance company from going that route. To make matter worse, your cost of ownership will continue while the repairs are underway.
Under-Insuring: When you under-insure your aircraft, the insurance company may be put in a position to say the aircraft is a total loss, leaving you without enough money to replace it. And to make this scenario worse, the insurance company keeps the damaged aircraft if it’s determined to be a total loss.
Do You Want to Insure Your Own Aircraft Some Day?
Maybe this is more of a problem you’d like to have. If you’re thinking about insuring your aircraft, it would logically follow that you own an airplane. What would follow that would be that you are a licensed pilot. Have you been thinking about pursing a career as a commercial pilot?