QUESTIONS & ANSWERS
Question: My aircraft has a market price of $ 75,000 and I have it insured for $150,000. In the event of a Total Loss what will I receive?
Answer: Aircraft insurance policies are written on an "Agreed Value" basis. This means that in the event of a "Total Loss", as defined in YOUR policy, you will recover the amount of the physical damage coverage stated in the policy. Less of course any deductibles.
You will also receive a pro rata return of the physical damage premium. There is no connection between the so called Blue Book value and the Insurable Value. The Insurable Value reflects to the current costs to restore the aircraft back to its condition prior to the loss. The Blue Book is a report on sales of this make and model REPORTED to the Blue Book by subscribers of the Blue Book It might be possible to replace my 1978 182Q with another but it would not be the same and you would save very little money with the hull insurance reduction If a $100,000 hull has a premium of $1,200 annually A $50,000 hull would not be $600. When you increase or decrease your hull cover you are only acting on about 10% of the premium. The other 90% is for partial loss. Also there is a minimum premium which is the base premium.
Question: How much Liability Coverage should I have?
Answer: What are your assets? Remember ALL of your assets (with some restrictions) are EXCESS coverage over whatever primary limit you bought.
If you have 500 shares of Google and 300 shares of Facebook then you need more limits tha n if all you have is a maxed out credit card and a job at Burger King. There was an article not long ago on a popular web site saying that you r liability needs are determined by your passengers net worth. Rubbish!!!! The determining factor is what do you have available to pay the judgment . Sometimes I hear 'I only fly with my family and they won't sue me.' Yes they will. They are "Passengers" by definition and the Insurance Company money will take care of their injuries better than your money. The minimum limit is a Smooth Million No Passenger Sub Limits.
Question: What would cause an insurance company to deny coverage?
Answer: There are two major conditions which are critical when an Insurance Company is presented with a claim. If either of these two conditions are not completely fulfilled the Company may deny protection.
The insurance terms for these conditions are "PILOT WARRANTY" and "USE WARRANTY."
A PILOT WARRANTY restricts pilots of the aircraft to certain specific individuals and/or certain levels of proficiency. The most frequent cause of denial of coverage, by the Insurance Companies; is when the pilot fails to meet the Warranty requirements of an exact number of logged hours. If there is any doubt, do not allow anyone to fly your aircraft unless he shows you his log.
A USE WARRANTY states the purpose of use of the aircraft i.e.,
- Private, Pleasure and Business.
- Limited Commercial. (which is usually for Student Instruction and Rental)
- Full Commercial including Charter.
Question: What is a BREACH OF WARRANTY ENDORSEMENT ?
Answer: This is an insurance policy required by the lending institution and is attached to your policy. It assures the lending institution that, even though the Insurance Company has denied protection because you have failed to comply with any of the Warranties, the lending institution will still recover their lien.
Bear in mind that the Breach of Warranty Endorsement gives YOU no protection whatsoever. The fact that the lending institution has had their lien satisfied only changes your position to the extent that you now owe the Insurance Company for the lien instead of the bank.
Review the USES and the PILOT WARRANTIES on your policy and if you have any questions, please feel free to contact us .
Question: Who owns the aircraft?
Answer: The owner of the aircraft is the registered owner as described in the F.A.A. Title papers. No one else owns the aircraft. i.e., a corporation with only a single stockholder is the registered owner of an aircraft. When you meet the stockholder on the ramp, he refers to "my airplane." It is not his airplane - it is the corporation's airplane.
Should the stockholder fly the airplane and pay the corporation an hourly charge, he has now become a renter pilot. Conceivably the stockholder could damage the aircraft, wind up with no defense of suit under the Liability portion, and be responsible for paying the insurance company for the physical damage loss because the owner of the aircraft is the corporation .
Question: What are "expenses"?
Answer: Expenses is defined differently by various Insurance Companies. Some have no definition. They simply say "There is use for which a charge is made" You can however be reimbursed for "Operating Expenses" Notice it did not say Direct Operating Expenses. Other policies define exactly what is Expenses are and you will have to read YOUR policy to determine what is allowable
Question: What should I do when my airplane sustains a loss?
Answer: The first thing is to protect the property. This means that you should act as though all the loss would be paid directly out of your pocket. You must do this under the terms of your insurance policy. You are however, expected to act reasonably. The insurance company does not expect you to sit up all night at 10° below zero to protect your aircraft.
If possible, remove all your radios and any valuable equipment that is easily stolen. More loss occurs after the accident than is usually caused by the accident. Try to arrange for a guard so further loss is not incurred.
Assuming the aircraft is now secure, call your agent and report the loss. The next step is to attempt to determine the extent of the loss and who will repair it. Under the terms of the insurance contract, it is really the responsibility of the insured to determine the amount of loss, not the insurance company . If you will refer to your policy, you will see that the insured must file a proof of loss within a 60-day period. When the insured files a proof of loss, he must therefore be able to prove the loss.
In order to prove the loss he must get estimates from reputable repair shops. The insurance company sometimes appears to be doing this, but at no time are they acting on behalf of the insured. They are simply ascertaining the amount of their liability.
All bills for work accomplished will be billed DIRECTLY to the insured. At no time will any bills be sent to the insurance Company. Therefore, the insured must be extremely careful to be sure that he will be reimbursed to the degree that the repairer charges him. In this regard the insurance Company does not authorize any work. Since all work will be billed to the insured's aircraft, the INSURED authorizes the work.
The insurance company merely agrees with the insured that should certain work be accomplished at a certain price, it will reimburse the insured for the cost of the work accomplished. The cost of any additional work will be borne by the insured . For example, should the insured have a 600 hour engine and it is determined that it has a bad crank shaft, the insurance company will reimburse the insured for the cost of opening the engine, repairing the crankshaft, and putting the engine together again. However, if the insured puts rings, bearings, valves, or anything else in the engine, the insurance company will not pay him for it. Again caution: Make the repairer give you a separate bill for any work not agreed upon· with your insurance company.
It is the insured's responsibility to determine that the loss was completed satisfactorily in accordance with the insured's understanding with the company of what the repair facility was to accomplish. The insurance company is not responsible in any way for workmanship. If the airplane isn't painted correctly or if it doesn't fly correctly, that problem is the insured's problem.
As we stated previously, the insured is responsible for the repair.
The insurance company will only reimburse the insured for the cost of the repair.
Question: Should I purchase insurance to protect myself when I rent an aircraft?
Answer: I begin the discussion by asking three questions of my own:
- Do you have any coverage from the FBO?
- Did you sign anything or do you sign an agreement when you rent?
- What is the value of the aircraft are you flying?
The importance of these questions will become apparent as you read on.
I suggest that you speak with your FBO and ask "do you have any insurance that PROTECTS me?" If not, "do you have insurance for renting aircraft?"
Some FBO's will have a Liability extension to the renter pilot. Usually $100,000 total coverage for Liability.
No FBO, which I know of, has any coverage for renters damaging the aircraft he has rented. If you, the renter, has signed a rental agreement you may find that you are liable for the first $500 of the loss or you may find that you are liable for the ENTIRE loss. Sometimes the wording on this is tricky/and while you may think he (the renter) is only responsible for $500 you may find out that you are responsible for the entire damage.
If you are have not signed an agreement then you are liable for damage that you cause due to your negligence.
What negligence is; is something for a court to decide. However, the simple fact that the renter damaged the aircraft does not meet the test of negligence.
If you would like complete protection, I will tell you about 'Non Owners Liability Policy' and further suggest that you buy 'Hull Legal Liability.'
To obtain this protection, contact us to select your desired coverage and determine your Premium.