Sky Aviation Insurance
6 Factors Affecting Private Aviation Insurance Costs
Private aviation insurance is a unique and specialized product, and there are a number of factors that go into determining costs.
- October 26, 2022
- Pompano Beach, FL
Table of Contents
Add a header to begin generating the table of contents
In this blog post, we’ll look at six factors affecting private aviation insurance costs. So, if you’re in the market for new private aircraft insurance coverage or looking to make a change, be sure to keep these factors in mind!
The Aircraft
The cost of aircraft insurance is largely determined by the make and model of the aircraft. Though this may be commonly understood, let’s explore the reasoning behind it.
Loss Ratio
One of the key factors is the aircraft’s “loss ratio”. This is a mathematical equation that compares the number of losses each aircraft has over time, to the number of units flying and the total hours flown by those units.
Insurance companies use aircraft make and model loss ratios to set aircraft insurance premiums because they provide insurers with information about an aircraft’s historical loss experience.
Passenger-Carrying Capacity
Aircraft insurance premiums are partially based on the aircraft’s approved maximum carrying capacity and the average passenger load. Often, the insurance companies will find it helpful to know if the aircraft passengers are employees, officers of the company, or others.
If you find that you no longer need to transport as many passengers as your current aircraft allows, you may be able to switch to a smaller aircraft and save on your insurance costs.
Of course, this decision should be made with caution, as the smaller aircraft may not have the same range or performance capabilities as your current aircraft.
You will also need to factor in the cost of the aircraft itself and any modifications that may be necessary to meet your current needs.
However, if you are able to make the switch to a smaller aircraft with a reduced Hull Value you may be able to reduce your aircraft insurance costs significantly.
Age Of The Aircraft
This leads us to age. Age is factored into aircraft insurance costs.
The older the aircraft, the more difficult it may be to find replacement parts, or parts may be obsolete.
These aircraft may have difficulty getting repair and maintenance services, and their pilots may have difficulty getting training.
As a result, the insurance company may see this as a risk, therefore, deeming it to be more likely to have an accident, often resulting in higher claims losses thus interpolating to higher insurance premiums.
History Of The Aircraft
Surprisingly, the age of an aircraft is not as important as its history.
An aircraft that has been well-maintained and has a good safety record will be cheaper to insure than one that is the same age but has been in an accident or otherwise has a poor maintenance history.
The aircraft should always meet or exceed the manufacturer’s specifications and all FAA requirements in order to be considered safe.
Aircraft that have not been properly maintained are more likely to experience problems, regardless of their age, therefore staying grounded. The longer the aircraft is on the ground, the more opportunity for other problems to occur.
Sometimes it is more important to focus on the aircraft’s history and maintenance than on its age when it comes to insurance costs.
Now that we’ve got an understanding of why the aircraft itself has a large impact on insurance costs, let’s dive into the other factors affecting insurance prices.
Aircraft Use
The way an aircraft is used will change the coverage, therefore either increasing or decreasing your insurance costs.
Aircraft used for business purposes are held to different standards than aircraft used for charter or personal purposes.
As a result, aircraft insurance premiums will reflect these differences.
For instance, aircraft used for business purposes may be required to have more comprehensive coverage than aircraft used for personal use.
Similarly, aircraft used for charter purposes may be subject to different rules and regulations than aircraft used for personal or business purposes. For example, a FAA Part 135 charter use requires Liability Limits of $100,000,000 often a significant cost of the policy.
Understanding the different types of aircraft use can help you make informed decisions about your aircraft insurance policy.
Aircraft Storage
Aircraft storage is an important part of protecting your investment.
When aircraft are left out in the elements, they are exposed to potential damage from weather events like strong winds and hail.
By storing your aircraft indoors or in a covered hangar, you can help to protect it from the elements and keep it in top condition.
Proper aircraft storage extends the life of your aircraft by preventing premature wear and tear.
Limiting damage to an aircraft is key to keeping insurance costs down. Therefore, owners should consider hangar or covered storage to reduce costs.
Follow this link to watch a video of an unsecured plane during a storm at Sky Aviation Headquarters.
The Base Location
Insurance for an aircraft is significantly impacted by where the aircraft is based.
Landing strips are a critical asset in the airlift, transporting, and delivery industries. When choosing a base location, keep in mind such factors as the length of runways and weather conditions.
Also, many times underwriters will want to know if these aircraft have common routes that they consistently follow. This could result in reduced exposure as the pilots become familiar with the associated runways and airfields.
The capabilities of an aircraft to operate from that location are determined by these elements.
More experienced pilots see lower costs than their less-experienced peers.
Pilot Experience
Experience matters when it comes to airplane insurance.
As a pilot, one of the best ways to lower your insurance premiums is to obtain additional ratings or certifications. It is also imperative that the pilot takes recurrent simulation training annually as almost all insurance companies require it on the aircraft in which they are operating.
This not only shows that you have more experience, but also that you are willing to invest in your career.
In addition, ratings could also be required to receive a quote as well as minimum hour standard in the aircraft they are insuring
Offer a continuing education program to your aircraft pilots; not only will it help with insurance and retention, but also the company’s liability. Again, annual SIM training may not only be required, but it also will assist the pilot in training on the aircraft for adverse circumstances, something that many pilots are relatively unfamiliar with.
More experienced pilots see lower costs than their less-experienced peers.
This price gap can be larger when compared with more complex aircraft.
Typically, the more complex the aircraft is to fly, the wider the spread in airplane insurance costs between experienced and inexperienced pilots.
In general, pilot experience is a key factor in determining airplane insurance cost – the more experience, the lower the cost.
So, if you’re looking to save on airplane insurance, make sure you or your pilot has some good flight time and continuing education.
The Benefits of Being Aware
Aircraft insurance is a specialized type of insurance that is designed to protect aircraft owners and operators from financial losses that can result from aircraft accidents or incidents.
Aircraft insurance rates can vary widely, depending on the type of aircraft, the pilot’s experience, the location of the aircraft, and other factors. An experienced broker works on your behalf to secure the best terms and rates from each individual company.
As a vital form of protection, it is important to understand how your policy is structured in order to understand how it is priced.
Sky Aviation Insurance Services has the knowledge and experience to help you to understand the underwriting criteria and choose the right policy for your needs.
With our guidance, you can be sure that you are getting the best coverage at a fair price.
Contact us today to learn more about our aircraft insurance services.
Annual Coverage Review
It’s not enough to simply buy a policy and then forget about it. As an aircraft owner, it is important to review your insurance policy annually and make sure that you have the coverage you need.
Hiring a professional to help you with this process could be one of the best decisions you ever make.
An aviation insurance broker can help you assess your needs and recommend the best coverage for your aircraft. It is important to understand while you feel all insurance companies may be the same, the rates are definitely individually aligned with the amount of information a broker can present on your behalf.
They can also provide you with an updated valuation for your aircraft, which can help you make sure you are adequately insured.
Talking with your aviation insurance broker annually is a good way to ensure that you have the right coverage in place for your aircraft.