Testing the limits

The most important coverage on your policy is often the most misunderstood--aircraft liability limits. You hear us banter around insurance terms such as smooth limits, combined single limit, sublimits, per passenger vs. per person, etc. What does it all mean?

Explaining coverage is often best done with a claim scenario. I love to golf, as I’m sure a few of you reading this column do as well, so let’s go out on the links to review how this accident scenario plays out depending on the type of liability limit you’ve purchased on your policy.

Here’s the accident scenario: You need to make an emergency landing in your Baron and spy a golf course below with a long, fairly straight fairway. You are able to land, but your passenger suffers a serious neck injury, a golfer is busy texting not paying attention and does not move before your wing knocks him to the ground, and the fairway is torn up, not to mention the damage to your Baron. Not your best day.

So we have the following claim components: bodily injury inside the aircraft to your passenger, bodily injury outside the aircraft to the golfer, damage to the golf course, and damage to your aircraft. Your aircraft damage will be handled under your hull coverage, but the rest fall under your liability limit.

With a “smooth” limit, which is the informal term for a combined single limit (these are one in the same), you have your entire limit to address all three liability claim components. So if you insured at $1 million smooth, you would have the full $1 million to address claims from your passenger, the golfer, and the golf course.

Now let’s look at the claim with a liability limit that involves a “sublimit”. Smooth limit policies certainly are more expensive, and you’ll understand why in just a minute.

With a “per passenger” sublimit, which is a common limit available from the standard marketplace and often purchased, your passenger coverage is reduced to the “sublimit” on your policy. So if you insured at $1 million limited to $100,000 per passenger, the golfer and the course would be under the $1 million and coverage for the passenger claim would be limited to the $100,000.

With a “per person” sublimit, which is found in policies issued by some direct underwriters, not only is your coverage reduced for your passenger, but also for the golfer in this scenario and would be for anyone injured inside or outside the aircraft. “Per person” sublimits are the most restrictive and should be avoided if at all possible. There is markedly less coverage than the other liability limit options, and there is almost never a related premium savings.

Check the liability limits on your policy to understand your coverage before your next takeoff. Visit the AOPA Insurance Services website to learn more.