The answer is not always simple. Are you insured to value? Several factors impact the answer. Do you want to be able to replace the aircraft in its current condition, or do you just want to cover your initial investment?
A rule of thumb is that if your aircraft is damaged within 70% or better, of its insured value, your insurance company has the option of totaling the aircraft rather than repairing it. If that happens, they get the aircraft, avionics, with any upgrades, to sell to a salvage dealer to recoup their losses. Used aircraft parts are expensive and sometimes difficult to find, so it may be in their best financial interest to total the aircraft. There is no obligation to sell back the salvaged aircraft to the original owner. That is rarely done, and only done on a case by case basis.
What is your aircraft worth? Under insuring increases the companies option to total it, if it has extensive damage. We have been occasions had the aircraft been insured to value, for only another $5k-$10k it would have been repaired instead of totaled. Over insuring is wasting money, and since the insurance companies have a pretty good idea of basic values, they will want you to substantiate any value they feel is unreasonably high. Just because your AC is restored to ‘like new’ condition, doesn’t necessarily add a lot of extra value, because every aircraft is supposed to be in top working condition.
Some aviation brokers have access to an aircraft bluebook as a starting point. AOPA members can log in to Vref, to find approximate values, then add or decrease for engine time, avionics, etc. Only the retail cost of the upgrades can be added, excluding the labor to install them. Of course you can compare your aircraft to other similar planes for sale, but that is really a rough estimate. Many asking sales prices are high.
The insurance cost for an additional $5k or $10k is relatively inexpensive not to consider it. Example, to increase coverage on a C172 from $50k to $55k with a basic Private pilot goes from $707 to $755, or $10 per $1k. From $100k hull to $110k is only $8 per $1,000. Similarly a C182 from $150,000 to $160,000 is only $8/$1000 .
Many situations can happen out of your control. Mechanical malfunctions, wind, snow, or someone hits your aircraft while parked. Don’t get caught under insured. Maybe it’s time to review your insured value?
Continue Reading
