Aircraft Insured Value & Aviation Insurance Coverages
With Tom Hauge, Aviation Insurance Broker at Wings Insurance
One of the hot topics in the aircraft insurance world over the last couple of years, and certainly post-COVID, is the inventory levels of pre-owned aircraft and how that has impacted the asset value of an owned aircraft.
Supply/demand logic dictates that when OEM’s have a multi-year order backlog for new aircraft deliveries and pre-owned aircraft inventory levels are very low, it can drive “artificially” higher valuations for owned assets. The premium for the insured value of any aircraft (physical damage coverage) drives 60-80 percent of that aircraft’s total annual insurance premium in most cases.
So it is a topic you, as a current or future aircraft owner, will want to keep a close eye on in terms of properly valuing your aircraft on the insurance policy.
Stated Value
Aviation insurance differs from automobile insurance, for instance, as it’s a ‘stated value’ policy. Stated value means you, as the policyholder and insured party set the value of the asset and that value is what claims are adjusted off of and also what you pay premiums on – very dissimilar to auto insurance, whereby the asset value is determined by an insurance adjuster at the time of loss and an initial valuation is determined by the insurer at the time coverages are placed.
The stated value of the aircraft on an aviation policy is typically defined when the aircraft is purchased/first insured and usually reflects the purchase price. Stated values on aircraft policies can be amended anytime by the policy holder but it is a good idea to assess the valuation of your aircraft at it’s annual insurance renewal. Values can fluctuate during the policy period namely due to pre-owned inventory levels or perhaps you have completed upgrades, engine overhauls or other enhancements to elevate the asset value of your aircraft.
Over or underinsuring?
Insurers generally won’t allow you to deviate more than 10-20 percent from Blue Book or what Vref is showing – so if you are seeking higher insured value than those aforementioned resources which suggest what your aircraft be valued at – be prepared to substantiate the requested value either with an appraisal or build scope/work order showing the upgrades contributing to the deviation from ‘Blue Book ’.
If you overinsure your aircraft you run the risk of an insurer having grounds to repair and an aircraft that otherwise should have been totaled as insurers adjust losses on the stated insured value rather than a market value (as an auto loss would be adjusted). You also will pay a higher annual premium to have your aircraft ‘overinsured’.
On the flip side of that equation is underinsuring your aircraft can result in an insurer totaling an aircraft (and taking possession of the salvage) for a loss that should otherwise have been repairable. The bottom line is to have the insured value discussion with your aviation insurance broker at policy renewal each year and gain a trusted opinion of what your Pilatus might be worth from a reputable Pilatus re-seller in the space (JetSwiss for instance for the Pilatus class of aircraft).
ABOUT TOM HAUGE
Tom Hauge and Wings Insurance, broker aviation insurance for thousands of turbine pilots and owners worldwide. Wings Insurance has 6 USA offices locations and 45 employees and is approaching it’s 40th anniversary year since being founded in 1984. A foremost expert in the placement of owner/flown turbine aviation policies. Wings maintains reach to all aviation underwriting markets here in the USA and also globally via our brokerage partnership in the EU with SAAM Verspieren.
Tom Hauge can be reached directly via email at thauge@wingsinsurance.com or mobile 612-578-5055