Insurance shopping is fascinating and, might I say, overwhelming, when you discover the variations in coverage and prices available.
The bottom line is always What are you buying? That's not always easy to decipher, though. Most policies come with a glossary or pamphlet of definitions. That's where you should head first.
Not all policies use the same language. Find out who's who and what's what with each policy by using its specific terminology, found in the "definitions" or "words and phrases" section.
You'll find that reading a policy is like tackling any new language, a challenge at first, but it gets easier with successive readings. The only catch is that each company's policy may use a slightly different "dialect." Where one might say, "insured person means you and your spouse," another company's definition of an insured person may be limited to only those names in the "named insured" box on the policy. That's a big difference.
Read the blocks
Eugene M. Saxon, a marketing executive with Signal Aviation and Marine Underwriters Inc., puts it succinctly, "The place you want your name in is the 'named insured' box." That is, at least as his company's policies are generally written. The "named insured" is the person being insured. If this person abides by all that follows in the policy's next few sections, it or they are covered in the event of an accident.
If your name appears anywhere else on the policy, such as under the "pilots flying the aircraft" box, you may be covered, Saxon says, but that can depend on the insurance company and the lawyers interpreting the policy at the time the claim is made.
Check the policy period, the location of the aircraft, and its description for meticulous accuracy. If you move your aircraft to a new airport or even a different hangar, you'd best make sure it's on the insurance. If you take your airplane from a hangar and leave it tied down on the ramp for an extended period of time, you'd best notify the insurance company.
While you are near this box, note where you can fly (sometimes called "Policy Territory"). My policy says it covers my airplane and me while flying in the U.S., Canada, and Mexico, but it excludes Alaska and Hawaii. The policy says nothing about flying in the Caribbean. When I go there, I have to obtain additional insurance, known as a "rider" or an "endorsement."
Occasionally an insurance company will give you these endorsements or even, in the case of Mexico, equivalent foreign policies, as a courtesy, without charge. Before you sign on, check and see what each company does if you fly outside the U.S., and, if possible, get the endorsement appended to your policy up front.
Next notice the "Coverage and Limits of Liability" section. Here's where you find out how much money the insurance company is willing to dole out in the case of an accident, and in what parcels. Some policies have a per seat limit that is considerably lower than the total limit for the policy. Others are "smooth," a term that means the company will dole out up to the policy maximum on one event even if the airplane is half-empty.
your airplane may be worth $70,000, and you purchase $70,000 in hull insurance, but you shouldn't stop there. If you have an accident the likelihood is high that the personal injuries and property damage you cause is far more than the airplane's value. That's what liability insurance is all about. You need to insure yourself for an amount that is close to your entire net worth. If you don't, you'll be paying out-of-pocket for those damages, including pain and suffering on the part of those injured or killed by your airplane. That's the kind of thing that ruins people financially.
While you're there, see what the difference is between your coverage on the ground and in the air. If the policy has an "Aircraft Physical Damage" section, you may find your deductibles here. Read carefully to see whether you're covered if wind or fire causes the hangar damage, or whether you're covered only if your airplane causes damage to other's property. Check for an endorsement stating that if the damage to your aircraft is higher than the amount it is insured for (sometimes called its "agreed upon value"), the insurance company will pay off, but will also take the airplane.
Finally, don't mistake bodily injury liability coverage with medical expenses paid per seat (one is much lower). Generally, aircraft insurance will only kick in to pay medical expenses after all other insurance (namely medical insurance) has paid out. That's why the numbers in this box are generally low in comparison to the other coverage boxes.
You can see what you're paying for in the "Premiums" section. It breaks out how much each segment of coverage costs. If cost is an issue, perhaps you can trim coverage in one section, or choose higher deductibles (the part of the bill you must pay before the insurance starts paying). In either case, this is a good place to look when you compare costs across different policies.
Make sure you are listed in the section titled "Pilots flying the airplane." If you aren't and you do fly the airplane, get your name there. Sometimes you'll find an open pilot warranty, which allows coverage for the named insured if any pilot who matches or exceeds the listed qualifications flies the aircraft. Do not mistake this clause as license to rent your machine (unless you've got a policy that allows renting in its "usage" block). It's not.
Be sure that "The use of the aircraft" matches what you intend to do. If you intend to start a flight school with this machine, you'd better have "rental and flight instruction, commercial" listed here. If you don't, your insurance may be invalid if you teach in or rent that aircraft. Kind of defeats the point doesn't it?
Exclusions
Make sure your policy says precisely who is insured, what is insured, where it is insured, how much insurance there is, how much it costs, who can fly the machine, and how the machine can be used.
Once you've satisfied yourself that the basics are correct on a policy, dig deeper into the fine print and find out what the policy won't cover. You may be shocked to find that cross-liabilities exist. Sometimes policies don't count spouses or other family members in the airplane as passengers, and, as such, cannot make liability claims if they're involved in an accident with you flying. Sometimes the same restrictions exist between partners in an airplane. Often your employees are excluded, as are any people employed in aviation who might be servicing your airplane or offering you flight instruction in your airplane.
If you want your flight instructor to be covered, you'll probably have to get an endorsement to the policy. (Flight instructors are advised to check their school's insurance to see if they have coverage there. Otherwise they should purchase their own CFI liability insurance). Renters are almost always excluded (they too, are well advised to carry their own insurance).
Remember, no two aviation insurance policies are exactly alike. If the policy adds up, the exclusions aren't too exclusive, and the price is right, grab it. You may not come upon another policy quite like it ever again.
