Sky Aviation Insurance
Ensuring your aircraft is insured to its correct value
When it comes to aircraft insurance, it’s important to make sure that your policy reflects the true value of your aircraft. Here are some tips on how to do just that!
- November 10, 2022
- Pompano Beach, FL
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Many people don’t realize that aircraft are just like any other valuable property when it comes to insurance. Just as you wouldn’t underinsure your home or car, you shouldn’t underinsure your plane. In this blog post, we’ll discuss why it’s important to insure your aircraft for its full value and how to go about doing so.
The Importance of Adequate Aircraft Insurance Coverage
Your aircraft is a major investment, one of the biggest in your life, and oddly most aircraft owners neglect to make sure it is properly protected in the event of an accident or other unforeseen circumstances. That’s where your aircraft’s insured value comes in. Just as with any other type of insurance, you need to make sure you have adequate coverage in case something happens to your plane.
Unfortunately, many plane owners make the mistake of insuring their aircraft for less than it is actually worth and in a majority of those cases, it’s either because they don’t keep up to date on their planes’ current value, or because they are trying to save on their premiums which could end up costing them if they ever need to make a claim.
Reasons why it's so important to insure your aircraft for its full value:
1. The Cost of Replacing Your Plane Could Exceed Your Insurance Coverage
The cost of replacing your plane could easily exceed the amount of coverage provided by your insurance policy. If you don’t have enough insurance to cover the cost of a new plane, you’ll have to pay the difference out of pocket.
2. The Value of Your Plane Depreciates Over Time
The value of your plane depreciates over time, just like a car, especially if you purchased it new. This means that your insurance coverage needs to increase as the value of your plane decreases Otherwise, you could find yourself underinsured if something happens to your plane. Also, keep current on aircraft maintenance as it can help ease the devaluation of your aircraft.
3. Your Aircraft Could Be Worth More Now Than When You Bought It
In some cases, the value of your aircraft could increase over time due to upgrades, refurbishments, or current market trends. You should always keep an eye on the market value of your aircraft, or check the value after significant upgrades such as new engines, aircraft engine overhauls, TBO Extension, aircraft avionics upgrades, or even interior redesigns. Be sure to check your current policy to ensure it reflects the current value of your plane.
How to Make Sure You Have Enough Insurance Coverage
Now that we’ve discussed why it’s so important to have adequate insured value of your aircraft, let’s talk about how to make sure you have enough coverage. Here are a few tips:
1. Know the Value of Your Plane & Its Insured Value
The first step is to know the current market value of your plane to determine its insured value. You can use online resources like Aircraft Bluebook or Vref Price Guide to get an estimate of your plane’s current market value. It’s important to keep in mind that the value of your plane will change over time, so be sure to check its value on a regular basis and adjust your insurance coverage accordingly.
2. Make Sure You Have Physical Damage Coverage
Physical damage coverage is one of the most important types of coverage for aircraft owners. This type of coverage protects your aircraft in the event it is damaged or destroyed in an accident, fire, weather event, or other covered peril. When shopping for physical damage coverage, be sure to get quotes from multiple insurers and compare coverages and costs before making a decision.
3 . Ensure Your Policy Covers All Possibilities
You could be sued for damages caused by your plane, even if you aren’t physically present. If your plane is involved in an accident that causes injuries or property damage, you could be sued for damages. If you don’t have enough insurance coverage, you could be on the hook for paying these damages out of pocket.
Liability coverage protects you in the event you are sued for damages caused by your aircraft. This type of coverage is especially important if you fly frequently or operate your plane for business purposes. Be sure to get quotes from multiple insurers and compare coverages and costs before making a decision on liability coverage for your aircraft.
4 . Speak To An Actual Aviation Insurance Broker
While online resources or a regular insurance company can give you a general idea of the value of your aircraft and quotes for insurance coverage, it’s important to speak with an actual aviation insurance broker. They will have in-depth knowledge and experience with aviation insurance and can help you find the best coverage for your specific needs and assess your plane’s insured value accurately.
5 . Understanding Agreed Value vs. Actual Cash Value
It’s important to understand the difference between the agreed value and the actual cash value in aircraft insurance policies. An agreed-value insurance contract guarantees that the insurer will pay out the full amount of coverage in the event of a covered loss, regardless of depreciation. Actual cash value basis policies may only pay out the depreciated value of your aircraft in the event of a covered loss. If you still are confused, don’t worry, it’s a confusing industry. Feel free to give Sky Aviation Insurance a call at 813.726.2020 to discuss your aircraft’s agreed value, actual market value, proper insured value, and how to go about properly insuring your aircraft. We aren’t just an insurance company in the insurance industry, we are an insurance company in the aviation industry.
Understanding Your Aircraft's Actual Cash Value
What is Actual Cash Value?
ACV stands for Actual Cash Value, and it's the amount of money an insurance company will pay to repair or replace your aircraft if it's ever damaged in an accident. To calculate ACV, insurance companies take into account the age and condition of your plane, as well as the cost of labor and materials necessary to repair or replace it.
Why is Actual Cash Value Important?
ACV is important because it's the amount of money you'll receive from your insurance company if your plane is ever damaged beyond repair. If you don't have enough insurance to cover the ACV of your plane, you could be stuck footing the bill for repairs yourself. Also, you could be over-insuring your aircraft, costing you more money per month than you should be paying so it is imperative that your insurance policy accurately reflects your ACV.
How Much Aircraft Insurance Should I Have?
The amount of insurance you need will depend on the value of your aircraft. To calculate the ACV of your plane, you'll need to get an appraisal from a qualified aviation appraiser. Once you have the appraised value of your aircraft, you can purchase an insurance policy that will cover at least that amount.
How Is Aircraft Value Calculated?
Aircraft value is calculated by taking into account several factors, including the make and model of the aircraft, its age and condition, damage history, current market trends such as a declining market, and upgrades or modifications made to the aircraft. It's important to keep in mind that aircraft values can change over time, so it's a good idea to check the value of your plane regularly and adjust your insurance coverage to reflect the current value.
The Cost of an Aircraft Accident
One of the main reasons why it’s so important to make sure your aircraft is insured for its correct value is because the cost of an accident can be significant. In fact, the average cost of a single-engine airplane hull loss accident, where the airplane sustains significant damage, is around $200,000, while the average cost of a multi-engine airplane hull loss accident can be over $1 million. And that’s not even taking into account any injuries or damage to property that may have occurred as a result of the accident. As you can see, if your aircraft isn’t properly insured with private aircraft insurance, an accident could leave you with a very large bill.
The Importance of Replacement Cost Coverage
Another reason why you should make sure your aircraft is insured for its correct value is that most policies will only pay out according to the replacement cost coverage limit – meaning if you don’t have enough coverage, you could end up being underinsured. This could leave you having to pay out of pocket to replace your aircraft, which, as we’ve seen from the average cost of airplane hull loss accidents above, could be a very sizable sum.
Aircraft Insured To Value Conclusions
As a plane owner, it’s essential that you make sure your aircraft is properly insured and that means insuring it for its full replacement value. By doing so, you can protect yourself financially in the event of an accident and ensure that you’re not left out of pocket should something happen to your plane.
To make sure you’re properly insured, get a current market value appraisal from a qualified aviation appraiser and purchase an insurance policy that will cover at least the appraised value of your plane. Please contact Marlene at Sky Aviation insurance on the form below or call 813.726.2020 if you have any questions regarding the value of your aircraft, or your aviation insurance needs, or just to answer any questions such as agreed value vs. insured value vs. market value of your aircraft.