Insurance for flight training operations is expensive, often confusing, and something you hope you never need. But you absolutely cannot operate a flight training/aircraft rental business without it. It isn‘t something that you can buy after a problem has occurred. That‘s also a terrible time to discover you chose the wrong agent or brokerage.
When the need arises, the insurance coverage or the agent can be the difference between survival and closing your business. You need to do a little homework before you choose an agent. Your business can only have one agent of record. That means it is important to make the right choice the first time. Switching agents can be nearly as difficult as breaking up a business partnership. If you are even to go shopping for a new agent, in effect you have to break up with the old one and sign new agent-of-record agreements so that a new agent can go out to the marketplace on your behalf.
The information you seek out before you choose an agent can drastically affect whether your business will have proper coverage in the event of an accident or incident in your fleet, or if someone you trained has a problem later and attempts to blame your training procedures. It also can affect whether the policies you purchase will cover any obligations that airport covenants or lease agreements with municipalities may require for your operation.
Here are items to consider when choosing an aviation insurance agent:
Does the agency insure other flight training providers?
Insuring privately flown personal aircraft is very different from insuring a flight training and aircraft rental business. The risks are different, the requirements placed on business operations by municipalities are different, and the instructional liabilities are different. While most agents work with underwriters for personal aircraft that also will "write a policy" for a training/rental operation, this doesn‘t mean that the agent fully understands the needs of and risks of a flight school/rental operation. Talk with the agent about his or her experience with flight training and aircraft rental operations. If he or she doesn‘t have the experience, a good agent will refer you to someone who does.
Does the agent take the time to look at your site, your aircraft, and your contractual obligations?
Each flight training provider has its own challenges and opportunities. It‘s important for an agent—and even sometimes a representative of the underwriter—to visit the site and review the conditions. A good agent should review the aircraft you use, the rental limitations you place on your customers, and your maintenance operations. He or she should also be willing to review any contracts you may have for ground leases, hangar leases, or business agreements with municipalities, to name only a few potential concerns. In these documents, it is common that minimum insurance requirements are set, distinctions of what types of coverages a business needs to maintain (for example, do you need "slip and fall" insurance for patrons on the airport or does the city cover that?) are set forth, and general business liability operating insurance requirements are included as appropriate. An agent who doesn‘t understand what operating requirements your business must meet won‘t write a policy that will properly cover the needs of the business.
Does the agent look at all of the business‘s needs?
Frequently, aviation insurance agents write only "the fleet" for a business‘s coverage when it may be advisable to have your agent look more broadly at the business‘s insurance needs. Taking into account potential coverage areas such as workers‘ compensation, hangars, or perhaps even vehicles operated by the business, the agent may be able to achieve economies of scale by combining policies into one brokerage instead of using multiple types of insurance through multiple agencies.
When an agent works to combine all the different types of insurance coverages, it may seem as though he or she is just trying to get a bigger policy and premium, but in many cases it really is the best thing for the customer. An underwriter is going to be more likely to work hard to keep a $100,000-per-year policyholder happy when an aircraft incurs some light damage and they need to pay on a claim than one that has a $10,000 per year policy on which the claim will be more costly than the yearly premium.
What is really going to be covered?
Can your agent or broker fully explain what is really going to be included in coverage? This can be critical. While it seems obvious that an aircraft would be covered in the event of an accident or other damaging event, what other things will be covered? Will you be protected for loss of business revenue stream if an asset (an aircraft) is no longer available to generate revenue? Will you be able to replace an aircraft that is destroyed in an accident when the insurance pays a bank note but provides no additional capital to replace the asset that was needed in the training operation?
Be willing to go outside the local area.
This is aviation, folks. If we really need to have a meeting, we can get in an airplane and fly somewhere to the meeting. There are always phones and digital conferencing options if we need to talk. I have seen businesses find some of the best fits for insurance across the country from their physical location. Don‘t think that you have to use the agent in your town. Shop widely. If there isn‘t a good one where you operate, go find one somewhere else. Most brokerages are licensed in multiple states.
Every business wants to find the most cost-effective insurance policies, but the cheapest may not result in the best coverage. It‘s necessary to strike a balance between the best value and the best coverage. The only way to do that is to find the right agent to sell the best product for your business needs.
The time to shop for an agent is before one goes out on the market to get quotes from underwriters on your operation. Interview agents; ask for references; talk with previous clients (with their permission, of course) who have had claims managed by the agent or brokerage. If they won‘t indulge these questions and provide some references, keep shopping. I promise you can find a provider who will better serve the needs of your business—even though you hope you‘ll never need their services.
Jason Blair is a designated pilot examiner and flight instructor. He has served as executive director of the National Association of Flight Instructors.