Even though a club may accept only the best pilots as members, it is still smart to have liability and hull insurance coverage for both the club's and the individual member's financial protection. When talking about clubs, most insurance companies consider aircraft ownership by more than three persons to be a flying club. This is important to know because club rates differ significantly from individual rates.
Flying club insurance rates are influenced by many factors, but the two most important are the number of members per aircraft and the proficiency of members. Insurance premiums may rise substantially for every member over 10 per aircraft . Relative to proficiency, insurance rates depend upon the type of pilot certificates held by members and the amount of experience each member has in the type of aircraft to be insured. Clubs with a large proportion of student pilots as members, or clubs wanting to insure sophisticated aircraft for members with little flight time in that type of aircraft, can expect to pay high insurance premiums.
There are other factors that play a role in helping insurance companies determine premiums. These include the types of airports used by a club, the extent of supervision over flight operations, the quality of the club's maintenance program, the club's accident history, the type of storage facility, whether or not a club requires periodic refresher courses and check rides, and the type of aircraft to be insured.
AOPA Insurance Agency offers aircraft owner's insurance. More information is available online or by calling AOPA, 800/USA-AOPA (872-2672).
The primary purpose of liability insurance is to protect the club and its members from financial disaster due to damage that might be caused by a club member, or an accident involving a club aircraft. It's a good idea for a club to carry as much liability insurance as is warranted by the club's actual risk exposure. Expert insurance counsel should be sought, and several sources should checked against each other before a policy is purchased.
Under a policy's liability coverage, a club's insurance company agrees to accept responsibility for paying monetary damages because of destruction of property, bodily injury, disease, or death sustained by a nonmember whenever any of these are the result of, or arise from, the ownership, maintenance, or use of a club aircraft.
Cross-liability coverage, i.e. coverage for club members who are passengers or bystanders when involved in an accident resulting from the actions of another club member, may or may not be included in the club's liability policy. A club should be aware of its coverage in this regard and either elect to include member coverage in its policy or alert members to the lack of such coverage. (Refer to the section entitled "Medical Payments".
As mentioned in the previous section, insurance rates vary depending on the size of the club, the flight experience and ratings of members, the type of aircraft being flown, and many other factors. Clubs should seek quotes from several insurance companies to check on the insurers' service records and determine the best value for coverage, cost, and service.
When checking rates, it's also a good idea to plan for the future. Clubs might consider quotes for the cost of adding new equipment, upgrading used equipment, raising or lowering pilot standards, and changing the number of members per aircraft. If an insurance company anticipates a club will grow and expand its line of equipment, it may be willing to offer lower initial rates to gain additional business in the future. Rates are not cast in concrete. "Horse trading" is often possible.
Hull insurance is for protection against the loss of or damage to a club's aircraft. It's usually a good idea for a club to carry hull insurance, but it's not an absolute necessity. Consideration needs to be given to the value of the aircraft a club flies.
With older aircraft, or aircraft having low market value, a club may decide to accept the risk of repair bills or loss of its airplane rather than pay a large premium for hull insurance. The club may also wish to limit flight instruction to certain, specific aircraft to handle insurance cost considerations.
Also, for a club with a large fleet of aircraft, a self-insurance pool can be created. When a club has enough aircraft that the total hull insurance premium exceeds the value of an aircraft, some thought should be given to expectations of the club's risk of loss. It may be considerably less expensive to create an account to "save" insurance premiums, and use it to pay for the club's actual hull damage. A small fleet or single aircraft club with limited risk exposure may not be able to create a large enough "pool" to justify the risk of self-insurance.
Hull insurance is flexible in nature and can be written to cover almost any situation. The most common coverage options are "all risks ground," "all risks flight," or both. Takeoffs and landings are considered in-flight operations rather than ground operations. A careful club will clarify this point with its insurance company before choosing an insurance policy. One other important point to consider is that some "all risks ground" policies exclude taxiing. Again, the insurance policy needs careful examination to determine exactly what coverage is being offered.
There are times when complete insurance coverage is required, usually when the aircraft is being financed. Most banks and lending institutions require a club to carry "all risks flight" coverage. A club also may have to obtain a Breach of Warranty Endorsement. This endorsement guarantees payment to the mortgage holder should the aircraft be lost due to a club violation breaching the insurance contract.
Hull insurance should be as thoroughly studied as liability coverage so that a club gets what it needs at a price it can afford. Good legal advice at this point could be invaluable.
Medical payment coverage is another type of insurance that clubs may wish to consider when purchasing insurance. It takes up the slack beyond liability coverage by providing medical coverage for club members. Medical payment coverage usually covers expenses for medical, surgical, and dental services for a person who is injured while in a club aircraft, or while getting into or out of the aircraft.
Clubs do not have to purchase insurance coverage as an all-or-nothing package. Most insurance companies can tailor insurance programs to the needs of each club, eliminating unwanted or unneeded coverage. For example, a club can get coverage against theft, fire, lightning, and explosion while in flight, on the ground, or both. This coverage is normally included in "all risks flight" and "all risks ground" but can be singled out if a club decides not to get the "all risks" coverage.
Clubs also may be able to purchase life insurance for individual members, particularly if the club is small. This protects the club in the event of a member's death by having the club named beneficiary. Each member would be insured in an amount equal to the amount of equity he or she has in the club's assets. If a member dies, the insurance money would be used to buy his or her share from the estate. This prevents the club from having to sell its assets or make a special assessment against members to cover the loss. A knowledgeable life insurance agent should be consulted for details.
Every club should examine the terms of coverage very carefully before committing itself to one policy or another. Rates and types of coverage can vary markedly, and each club should tailor its insurance package to its needs, which depend largely on the type of aircraft flown and the proficiency of its members.
Clubs should know exactly what their insurance covers. Nothing is more heartbreaking than to believe an aircraft or personal injury situation is covered by the club's insurance and then find out that it isn't.
A club should periodically look over its insurance policy to be sure its coverage is keeping pace with its equipment and its membership. As equipment changes and membership increases or decreases, there's a good chance rates will change also.
Updated October, 2011
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