Owning an aircraft is a big commitment in both time and money. To protect yourself, you need several types of aviation insurance. Understanding common terms from an aviation insurance glossary can help you decide which questions to ask your broker when you are deciding on coverage levels.
Aviation Insurance Glossary of Common Terms
Additional Insured – A person other than the named policyholder who is covered under the liability terms of an aviation insurance policy.
Aircraft Liability Insurance – Covers property damage other than to the plane itself as well as bodily injury.
Building Insurance – This type of insurance covers buildings such as hangars when there is damage due to things like vandalism, fires, storm damage, or other harm.
Business Personal Property Insurance, AKA Contents Insurance – Covers the contents of your buildings. You can insure things like electronics, tools, or fuel tanks. It does not cover damage to planes in hangars.
Complex Aircraft – These aircraft have several elements including retractable landing gear, flaps, and a controllable pitch propellor or engine control system with a computer that controls the engine and plane. There are several insurance factorsto consider when you make the move to a complex aircraft.
Conditions – Outlines the obligations of the person who takes out the insurance policy. It lays out what you have to do to file a claim and the requirements that you must meet.
Declaration Page – This is the first page of your insurance policy. It declares information about your policy such as the aircraft number and description, the Named Insured, the period in which the policy is in effect, the insurance limits for hull and liability, and deductible amounts.
Deductible – As with other insurance, this is the amount the insured has to pay before the insurance kicks in. With a $10,000 hull damage policy with a $3,000 deductible, the policyholder pays out $3,000 before the insurance pays out the remainder of the cost to repair the plane, up to the policy limit.
Endorsements – Changes to the policy, or amendments, to the original insurance agreement. This includes coverage that has been removed or added and supersedes terms elsewhere in the policy. These are found at the end of your policy.
Exclusions – These are circumstances under which your insurance company will not pay out against your policy. This list usually contains both a general list and a list of specific exclusions.
Fixed-Based Operator, AKA FBO – A commercial operation that provides aviation services that might include fuel stops, maintenance and repair, or aircraft parking. The FBO holds its own insurance coverage, and you should check what is covered before using one.
Hangarkeepers Insurance – Liability insurance that covers the owner of a hangar in the case of damage to a third party’s aircraft when it is in the control and custody of the hangarkeeper. It might include exclusions for acts of God such as a tornado or hurricane.
Hull Insurance, AKA Physical Damage Insurance – Covers the costs of repairing or replacing an aircraft after an accident.
Insuring Agreement – This section is a summary of the insurance company’s obligations to you. It lays out the limits on medical expenses, liability, and physical damage in your policy. It also lets you know if you will receive legal defense on behalf of the insurance company if you are liable for injury to a person or property damage in an accident involving your aircraft.
Loss of Use Coverage – Reimburses a policyholder for an inability to use his aircraft due to an accident.
Medical Payments Coverage – An addition to liability coverage that pays for medical, dental, and other expenses for the pilot and passengers.
Named Insured – This is the person who holds the insurance policy and is responsible for making premium payments
Named Pilot – A pilot named on the insurance policy who the owner adds and the insurance company has to approve. A named pilot with less experience than the named insured may result in a higher premium.
Open Pilot Warranty – Conditions set by the insurance company for people who pilot the plane. These are people other than named pilots. It lays out minimum requirements and the insurance company may refuse to pay if someone who doesn’t meet those requirements causes damage or physical harm.
Pollution Liability – A specialized part of hangarkeeper’s insurance for hangars where chemicals or aviation fuel are stored. It helps pay for legal costs and damages if a person is injured or property is damaged due to leakage into the soil or groundwater.
Purpose of Use – Spells out how an aircraft can be used under the policy. This includes:
- Business and pleasure with no charge for use
- Industrial aid where the plane is flown by professional pilots during business travel for which there is no charge
- Commercial use such as charters, rentals, instruction, banner flying, photography, and other uses
Renter’s Insurance, AKA Non-Owned Aviation Insurance– Covers people who fly planes they don’t own, such as students, instructors in other’s planes, and those borrowing or renting another’s aircraft.
Smooth Limit Coverage- This is a combination of liability covering property damage or bodily injury. This limit is usually set per occurrence and is separate from damage to the aircraft itself. Some insurance companies won’t offer this coverage because one passenger could collect at a very high level.
Sub-Limit – A limit within liability coverage naming the amount that passengers can claim for bodily injury and property damage. A $1 million liability policy might limit the amount each passenger can collect to $100,000.
Subrogation – A legal term that allows insurance companies to go after third parties. It lets them collect damages if someone else’s negligence resulted in the insurance company paying out a policy. For example, they can sue you as a renter to recover damages to a plane during flight training.
Waiver of Subrogation – The insurance company agrees not to go after third parties to recover damages when they pay out a policy.
Learn More or Get a Quote Today
To learn more about aviation insurance terms and policies, visit us at BWI Insurance. We are a family-owned business that has specialized in helping to insure pilots and aircraft since 1977. Thanks to our customer service and our ability to find favorable quotes and policies to suit most needs, we have been named a top aviation insurance company by Investopedia in 2021 and 2022.
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