As aircraft values continue to increase, it’s time to look at what you’re insuring your plane for.
Aircraft insurance is unique. While auto insurance is written on an actual cash value basis, aircraft coverage is written on a stated or agreed value basis. Meaning that you and the insurance company agree at the beginning of the policy term to the value of your aircraft. In the event of a loss, the insurance company is obligated to pay the agreed or stated value shown on the policy.
Many aircraft owners purchase an aircraft, insure it the first year for the amount they paid for it, and then make the crucial mistake of leaving the value the same at each policy renewal. If you’ve been renewing with the same value each year, chances are it’s underinsured.
Simply put, if you were to offer your aircraft for sale at that moment, what would a reasonable buyer pay for it? You can get a good idea of the current market value by consulting your aviation insurance broker who will give you the most recent bluebook value, or AOPA members have access to VREF. Another great source is an aircraft salesperson who specializes in selling your type aircraft. Keep in mind if you have an outstanding loan on the aircraft, you will have to insure it for the current market value or outstanding loan amount – whichever is .
The best way to explain under-insuring an aircraft is a bad idea is by example:
Suppose you have an aircraft worth $100,000 in current market value today. You currently insure it for $70,000 which was the value when you purchased it. A storm collapses the hangar on your aircraft causing significant damage which will cost $35,000 to repair. In today’s market where parts are difficult to find, the insurance company can decide to declare the aircraft a constructive total loss paying you the insured value of $70,000 less any applicable deductible and keep the salvage. Leaving you without an aircraft and short on money to purchase a new one. So, you can see why insuring your aircraft to the current market value is the smart choice.
If you’re not sure what your aircraft is worth, AssuredPartners Aerospace, AOPA’s partner for Aircraft Insurance can help guide you. Aviation insurance specialists can give you examples of how each coverage applies to your individual situation and help you figure out the right coverage for you, at the price you can afford.Call 800-622-2672 today to speak with one of our experts or visit www.ap-aerospace.com today to learn more. We look forward to serving all your aviation insurance needs.