January 2014 Issue
No Trip to the Mall
The homebuilt insurance shopping experience.
"I'm shopping for insurance."
We hear this phrase all the time, but what does it really mean when it comes to protecting your plane—whether it's still in hundreds of pieces or it has hundreds of hours in the air? It's not like you'll be taking a trip to the airplane mall and comparing makes, models, colors, and sizes.
The answer is very different, depending on if you talk to a consumer—you, the pilot—or an insurance broker. For you, the person who needs a policy, it probably means you think you're going to talk to a bunch of people and find the best price. But for a broker, it means that you're going to talk to a bunch of insurance companies and find a bunch of different options for the kit builder who wants aviation insurance. And for better or worse, you, the aircraft owner, can't talk to those companies by yourself.
Aviation insurance occupies a very specialized niche in the market, so you don't enjoy the same level of options as you do for, say, life insurance or auto insurance. Only one insurance underwriting company quotes directly to you as the insurer. Every other aviation insurance provider requires that you work with an aviation insurance broker. As a result, when you are shopping for insurance, you are actually shopping for a broker. And then, your broker becomes your designated shopper, charged with finding the best insurance company and the best policy for your needs.
Insurance isn't just for flying —many builders insure their projects so that if their home or shop burns down, they can recover (financially) and begin again.
All About the Broker
Even as an educated consumer, it can be hard to tell what qualities to seek in an aviation insurance broker. Overall, you can't go wrong with a broker who specializes only in aviation—that means they're experienced in the area that matters most, and have access to all the aviation insurance underwriters out there. Look for a broker who is knowledgeable about all aircraft, but especially the type of aircraft you own and are building. Not all brokers understand kit aircraft, so make sure to look for a broker with plenty of experience in this area of specialty aircraft. If they have never heard of anyone who actually builds the aircraft they fly, then that's not a good sign.
What's more, make sure your broker knows the insurance companies well and understands what their policies cover. Does the policy offer hurricane reimbursement fees? Does it cover the transportation of your aircraft if you have a precautionary landing and do not damage the plane, but are unable to take off? Do you have coverage to fly non-owned aircraft? Do you have premises liability coverage that extends to the area around where your aircraft is stored?
So how do you find this broker? You can search online or check the manufacturers' web sites to see if they have a certain broker they recommend. You can also check on specific aircraft forums online and see who other builders are using. Last, but not least, ask your friends. Referrals go a long way! If your friends are getting great service and trust their broker, then you probably will, too.
What does a broker do?
Your broker's first job is to shop all the appropriate insurance companies for you each year when you buy and then renew a policy. If your broker only gives you one option, we suggest you ask them what other insurance companies they approached, and find out if they received more quotes.
A broker's other job, equally important, is to place you with strong and stable insurance carriers. At this time, eight different insurance companies insure kit aircraft. Each company may not write every kit on the market, but this is a higher number than a few years ago, when only four or five insurance companies would insure kit aircraft. Occasionally, we see new insurance underwriting companies that debut with very low rates in order to build their business, but then fail in just a few years. In the aviation insurance world, if something seems too good to be true, it generally is. Your broker should put your best interests first; and while price is important, it's not always the most important criteria when finding a carrier. Choosing an underwriter with the lowest price is not always the best option.
Once you have found an insurance broker, there is no need for you to call another one each year, as long as you have built a trusting relationship. Your broker will be doing all the shopping for you.
When the skies turn dark and your airplane is outside, good tiedowns are important—and good insurance will give you peace of mind.
Once you select your broker, you can concentrate on the many different types of insurance policies and coverages that you can choose for kit aircraft. A qualified broker will help you understand each policy type, explain the differences, and help you decide which is best for you. More complex aircraft/engine types are going to be harder to insure and your broker may only find a few options for them, so not every type of insurance we review will apply to your aircraft. Again, check with your broker.
Many kit aircraft builders think this type of coverage is a waste of money. But ask yourself: If you've put so much time and work into this aircraft, shouldn't it be protected? Did you know that most homeowners' policies will not cover the aircraft kit and parts? It would be a very sad day if a storm or fire came through and destroyed your almost-completed Glasair. One of the more chilling stories we've heard about builders' risk involved a runaway car crashing into and damaging a row of storage garages, almost hitting the client's garage with his aircraft wings tucked inside. This very close call made the builder call and get coverage on his project—if it happened once, it could happen again.
But again, always discuss the policy thoroughly with your broker. For example, when you are pursuing a builder's risk policy, make sure the engine type you plan to use is approved by the insurance companies, and that they will insure the aircraft for flying coverage with the engine type you are using. Many carriers frown on auto engines.
It's also a good idea to learn how many hours you will need for the type of aircraft you are building, so you will be prepared.
Currently, affordable builder's policies are available from three different insurance companies. They offer no deductible for not-in-motion losses. You can choose to cover just the physical damage of the kit, or you can add liability coverage, too. Some airports require liability coverage to store your kit in their hanger. Builder's risk policies may also cover transportation of your aircraft—to the airport or paint shop, for example.
What's more, builder's policies allow for the changes that are a part of the kit process.
They provide coverage if you keep your kit in several different locations; you can have the engine at your house, the wings in a storage unit, and the tail kit at the airport and it will all be covered.
Similarly, you may be able to get a policy that will insure the plane at two values. This policy type is best if you know you will be adding some more items to your aircraft in the near future, and you don't have to worry about calling your broker to increase the value—unless it goes above the ending amount. For example, you can set the policy coverage to have a starting value of $40,000, with coverage that automatically covers up to an ending value of $80,000. You determine these insured amounts, but your broker can guide you about setting them.
Liability coverage is another option, although I'm sure you are wondering why you need liability protection on a plane that's in pieces. Beyond airport requirements, liability coverage protects you if anyone helping you build the aircraft is injured, or if you're transporting the aircraft and a wing falls off and damages a car, to name a few real-world occurrences.
At the high end of the game, insurance will be driven by pilot requirements and qualifications, as well as aircraft value. This Lancair Evolution is both high priced and high performance.
Preparing for Flight Insurance
Once you have completed the build process and received your airworthiness certificate, you're ready to upgrade to flight insurance. Make sure your pilot certificates and hours meet the minimum requirements for the aircraft you have built. Four insurance companies will cover the plane during the Phase 1 test period. These carriers require that the pilot has at least a Private Pilot Certificate unless you are in a more complex aircraft; then you may be required to hold an instrument rating as well.
For most non-complex, fixed, tricycle-gear aircraft, underwriters require at least 100 total hours. For some higher-horsepower or uncommon models, this number could be higher. If you've built a turbine kit plane, for example, the number of hours required will increase dramatically. For most non-complex, tailwheel models, insurers require 200 total hours, including 25 tailwheel hours.
Plan on transition training if it's available for your make and model aircraft. Typically, if your kit aircraft has tandem seats, an insurance company will accept the training in a side-by-side version of the same or similar aircraft. However, transition training may not be available for some Experimental aircraft. If this is the case, then your broker will work with the insurance company to accept another training plan. For example, we've had underwriters accept non-CFI pilots to give dual training when they have the appropriate experience in the same aircraft type.
The next step is to wade through the many forms of available coverage. Again, a qualified broker is there to help you make these decisions. Below are the most popular policies for kit aircraft pilots.
Full Coverage insurance:
This policy gives you the most protection, as it covers your aircraft for physical damage coverage at all times while parked on the ground, during taxi, and in flight. Liability is, of course, included in this policy.
Ground and Taxi Coverage:
This policy type covers physical damage to the aircraft while it is parked and not moving, and offers taxi coverage up to the active runway. Once the aircraft enters the active runway, you no longer have in-motion physical damage coverage, only liability coverage while flying. Physical damage coverage starts back up once the aircraft exits the active runway and is once again taxiing.
This policy type only covers your aircraft against physical damage while it is parked and not moving under its own power. There is no physical damage protection, only liability coverage, at any time when the aircraft is powered up, taxiing, or flying.
This one is self-explanatory—you are limited to liability coverage, with no physical damage protection at any time.
Notice that we haven't reviewed any sections about broker-generated rate changes, discounts, or extra fees. That's because they don't exist. You should get the exact same quote from different brokers, as long as you are providing them with the same information, and it is submitted the same way. This is why brokers ask you to sign a "broker of record" agreement, to prevent duplication. Your best bet is to find a broker you trust and whose service makes you happy, and then stick with him or her.
And that's your trip to the insurance mall. As in any mall, the choices may seem dizzying, but when you shop with good advice and a plan of action, you can survive—and even enjoy—the experience.
Jenny Estes, sales manager of the Light Aircraft Branch of NationAir Aviation Insurance, has been involved with kit aircraft both personally and professionally for most of her life. Jenny grew up watching her father build several kit aircraft. She has played an active role in expanding NationAir's programs for Van's RV and Lancair aircraft, and speaks regularly about insurance across the country.
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