Aircraft Insurance Requirements: Complete Coverage Guide

Understanding Aircraft Insurance Basics

Aircraft insurance differs significantly from auto or homeowners insurance:

• Specialized Market: Fewer carriers, specialized underwriting
• Higher Stakes: Aviation accidents involve greater risks and costs
• Pilot Qualifications Matter: Your experience heavily affects rates and coverage
• Aircraft-Specific: Each aircraft model has different risk profiles
• No Standard Rates: Premiums vary widely based on many factors

While not federally mandated like auto insurance in most states, aircraft insurance is essentially required for financed aircraft and strongly recommended for everyone.

Types of Aircraft Insurance Coverage

Hull Coverage (Physical Damage)

Hull coverage insures your aircraft against physical damage or total loss. Coverage types include:

Hull Coverage - All Risk Ground and Flight:

• Covers damage in flight and on ground
• Protects against accidents, weather damage, theft, vandalism
• Most comprehensive and expensive hull option
• Required by lenders for financed aircraft
• Typical for actively flown aircraft

Hull Coverage - Not in Motion:

• Covers only ground damage while parked
• No coverage during taxi, takeoff, flight, or landing
• Significantly cheaper than full coverage
• Appropriate only for aircraft not being flown
• Not acceptable to lenders

Agreed Value vs. Stated Value:

• Agreed Value: Insurer and owner agree on aircraft value upfront; that amount is paid in total loss (no depreciation applied). More expensive but better protection.
• Stated Value: Maximum payout amount; insurer may pay less based on actual cash value at loss time. Cheaper but provides less certainty.

Most owners choose agreed value to avoid disputes about aircraft worth after a loss.

Liability Coverage

Liability insurance protects you when you cause injury or property damage to others:

• Per Person Bodily Injury: Maximum paid per injured person
• Per Occurrence Bodily Injury: Maximum for all injuries in single accident
• Property Damage: Damage to others' property (hangars, other aircraft, buildings, vehicles)

Common liability limits:

• $1,000,000 combined single limit (minimum recommended)
• $100,000/$1,000,000 ($100k per person, $1M per occurrence)
• $2,000,000-$5,000,000 for higher protection

Higher limits are relatively inexpensive compared to hull coverage. Carrying $2-3 million in liability adds only $200-$500 to annual premiums but provides crucial protection.

Medical Payments Coverage

Med pay covers medical expenses for you and your passengers regardless of fault:

• Typical limits: $5,000-$10,000 per person
• Covers immediate medical bills from aviation accidents
• Supplements (doesn't replace) health insurance
• Relatively inexpensive addition

Additional Coverage Options

• Personal Effects: Coverage for belongings damaged in aircraft
• Loss of Use: Reimburses rental costs while aircraft being repaired
• War Risk and Terrorism: Special coverage for war zones or terrorist acts (rarely needed for personal flying)
• Floatplane/Seaplane: Additional coverage for water operations

Lender Insurance Requirements

If financing your aircraft, lenders mandate:

• Hull Coverage: Agreed value equal to loan amount or aircraft value
• Minimum Liability: Typically $1,000,000 combined single limit
• Lender as Loss Payee: Lender must be named on policy
• Notification Requirements: Lender notified of cancellation or changes
• Continuous Coverage: No gaps in insurance; automatic lien clause protecting lender even if policy lapses

You must provide proof of insurance (declarations page) to the lender before closing and maintain coverage throughout the loan term.

Factors Affecting Insurance Costs

Pilot Qualifications and Experience

Your qualifications are the single largest factor affecting rates:

• Total Flight Hours: More hours = lower rates. New private pilots (75-200 hours) pay highest rates. Significant rate reductions often occur at 250, 500, and 1,000 hour marks.
• Time in Type: Hours in the specific aircraft model or similar models. Zero time in type results in highest rates.
• Ratings and Certificates: Instrument rating significantly reduces rates. Commercial certificate provides further reductions. ATP certificate commands best rates.
• Recent Experience: Hours flown in past 12 months matter. Pilots with minimal recent time pay more.
• Age: Very young (under 25) and older (over 75) pilots may face higher rates.
• Accident History: Previous claims or accidents increase rates substantially.

Aircraft Characteristics

• Make and Model: Some aircraft cost more to insure due to accident history, replacement costs, or complexity. Bonanzas, for example, often cost more to insure than Cessna 172s despite similar values.
• Value: Higher value aircraft have higher premiums for hull coverage.
• Performance: High-performance, complex, or retractable gear aircraft cost more.
• Age and Condition: Well-maintained aircraft with modern avionics may receive better rates.

Intended Use

• Personal Pleasure: Lowest rates for recreational flying
• Business Use: Slightly higher rates for business travel
• Flight Instruction: Significantly higher due to increased risk
• Commercial Operations: Highest rates; different insurance category

Location and Storage

• Home Airport: Airports with better weather, longer runways, and controlled airspace often mean lower rates
• Hangar vs. Tiedown: Hangared aircraft typically receive 10-20% discounts
• Region: Some areas have higher rates due to weather risks or claim history

How to Get the Best Insurance Rates

Shop Multiple Brokers

Aviation insurance brokers represent multiple carriers. Shop 3-5 brokers who can access different markets:

• AOPA Insurance Services
• Avemco
• Falcon Insurance
• Travers Aviation
• AssuredPartners Aerospace
• Global Aerospace
• Regional specialty brokers

Rates can vary 30-50% between carriers for identical coverage, so shopping is essential.

Improve Your Pilot Qualifications

Before purchasing, consider:

• Earning your instrument rating (significant rate reduction)
• Building more total time
• Getting transition training in the aircraft type
• Completing safety courses (AOPA Air Safety Institute, FAA Wings program)

Sometimes delaying purchase 6-12 months to build qualifications saves thousands annually in premiums.

Accept Training Requirements

Many insurers require or offer discounts for:

• Checkout training with CFI (typically 5-10 hours)
• Annual recurrent training
• Flight review with specific instructors
• Ground school or online courses

Accepting these requirements (which are wise anyway) can reduce premiums 10-20%.

Increase Deductibles

Higher deductibles lower premiums:

• Standard deductible: $1,000-$2,500
• Higher deductibles: $5,000-$10,000
• Increasing from $1,000 to $5,000 might save $300-$800 annually

Ensure you can afford the deductible if needed—don't save premium dollars you can't afford to pay out-of-pocket later.

Bundle or Use Same Carrier

Some carriers offer discounts for:

• Insuring multiple aircraft with them
• Long-term customers (renewal loyalty discounts)
• Association memberships (AOPA, EAA, type clubs)

Insurance for Low-Time Pilots

New pilots face the toughest insurance market:

• Some carriers won't insure pilots under 200-250 hours
• Others charge premiums 2-3x what experienced pilots pay
• Complex or high-performance aircraft may be uninsurable for low-time pilots
• Training requirements of 25-50 hours may be mandated

Strategies for New Pilots

• Choose Simpler Aircraft: Cessna 172, Piper Cherokee, similar trainers are most insurable
• Build Time First: Rent while building to 250-500 hours before buying
• Accept High Premiums Initially: Rates drop significantly at renewal with more experience
• Get Instrument Rating: Single biggest rate reducer for low-time pilots
• Use Experienced Co-Pilot: Named pilot with high experience may reduce rates
• Join Flying Clubs: Some clubs offer better insurance access for members

The Insurance Application Process

Information You'll Need

• Aircraft make, model, year, serial number, N-number
• Aircraft value or desired insured amount
• Pilot certificates and ratings
• Total flight hours and hours in type/similar aircraft
• Hours flown in past 12 months
• Intended use of aircraft
• Home airport and typical operations
• Storage method (hangar or tiedown)
• Accident history in past 5-10 years
• Other pilots who may fly the aircraft

Timeline

• Quote request to quote received: 1-5 business days
• Quote acceptance to policy issuance: 1-3 days
• Immediate coverage available for closing if needed

Policy Review

Carefully review your policy for:

• Correct aircraft details and value
• Accurate pilot information
• Coverage limits matching your needs and lender requirements
• Named pilots (who's covered to fly)
• Exclusions and limitations
• Territory (where you can fly)
• Training requirements

Named Pilot vs. Open Pilot Policies

Named Pilot Policies

• Only specifically named pilots are covered
• Lower premiums
• Typical for single-owner aircraft
• Must notify insurer before adding pilots

Open Pilot Policies

• Any pilot meeting minimum qualifications is covered
• Higher premiums
• Necessary for flight schools, clubs, partnerships
• Minimum pilot requirements specified in policy

Common Insurance Exclusions

Standard policies typically exclude:

• War, terrorism, or hostilities (unless special coverage added)
• Nuclear radiation
• Intentional acts
• Flying outside policy territory
• Commercial operations if only approved for pleasure/business
• Flight instruction unless specifically covered
• Pilots not meeting minimum qualifications or not named on policy
• Flying under the influence of alcohol or drugs

What to Do After an Accident or Incident

1. Ensure Safety: Secure the aircraft and prevent further damage
2. Notify Authorities: NTSB and FAA as required
3. Contact Insurer Immediately: Most policies require prompt notification
4. Document Everything: Photos, witness statements, conditions
5. Don't Admit Fault: Provide facts but avoid liability admissions
6. Preserve Evidence: Don't repair or move aircraft without insurer approval
7. Cooperate with Investigation: Work with insurer's claims adjuster

Annual Policy Renewal

Most aircraft policies are annual with renewal considerations:

• Review Coverage Annually: Ensure limits still appropriate
• Update Information: Notify of aircraft modifications, pilot qualification changes
• Shop Periodically: Every 2-3 years, shop other brokers for competitive quotes
• Leverage Experience: Request rate reductions as you build time
• Don't Let Policies Lapse: Even brief gaps can cause major problems and rate increases