Matthew Waugh

May 2002

I was going to write a comprehensive document on aircraft insurance for non-owners, but in the end I decided I’d just make a few notes and provide some pointers to far better written documents than I could come up with. This is not legal or insurance advice even if it reads like it from time to time. You should contact your lawyer or insurance broker to ensure you know the real scoop before proceeding. I don’t recommend any of the companies mentioned here, I buy my non-owned insurance through the AOPA Insurance Agency, but I’ve never had a claim, so what do I know about actual service.

If you have comments or feedback about this article please send me e-mail at mat@mwaugh.com.

First of all, if you’re an aircraft owner none of this will apply to you, you’ve got your own insurance worries to deal with. This information is for people who fly other people’s planes, either as renters or “friends”.

Insurance Coverage

Nothing beats having your name on an insurance policy. That’s what being a “named insured” means, and basically it means that the insurance company has evaluated you, determined the risk associated with insuring you and decided to accept that risk in return for your premium (or a premium, but if you’re a named insured, chances are you’re paying the premium). Provided you comply with the terms of the policy, the insurance will cover you up to the limits of the policy. Sometimes a named insured is called an “additional insured” – same thing.

If you’re not a named insured then you need to understand subrogation. Essentially subrogation is the process by which an insurer pays off their named insured but then attempts to recover the amount they paid out from somebody who is responsible for the accident/incident but is not named on the insurance policy. So if you want to take advantage of an insurance policy upon which you do not appear as a named insured then you want to discuss a written “waiver of subrogation”.

The issue of not being a named insured comes up when you rent an aircraft. The FBO’s insurance covers the FBO, so if you damage the airplane the insurance company will pay the FBO but may come after you to repay them. This doesn’t always happen, I’m not even sure how often it does happen, but it could happen, and you should be aware of the issue.

Finally you want to know about “open pilot” clauses. These are clauses in an insurance policy that define the experience requirements that a pilot must meet in order to be covered by the insurance. if you don’t meet those requirements, fly the aircraft and cause damage, the insurance company will decline to pay anybody, and presumably the owner of the aircraft will come to you directly for payment. Even if you meet the open pilot requirements in a policy, you may still be subject to subrogation in the event of an incident/accident.

Being a “named insured” is NOT the same as being “named on the policy”, although they certainly sound similar. Being named on the policy just means that you are noted by name, either because you don’t meet the requirements of the open pilot policy (but the insurance carrier has agreed to let you fly the aircraft anyway) or you do meet the requirements but somebody just wanted your name on the policy anyway. YOU are not covered by the policy. The named insureds are covered by the policy when you are flying, but if you break it you can still be subject subrogation.

Liability and Hull Insurance

Non-owned aircraft insurance comes in 2 basic parts. Oh yes, let’s note that this is non-owned aircraft insurance. It’s typically called “renter’s insurance”, but it covers you in any aircraft you fly that you don’t own (and is within the limits of the policy). The 2 basic parts are liability insurance and hull insurance. Typically you can’t buy hull insurance without buying some form of liability insurance.

Liability insurance covers you for any damage you may cause to others, including passengers in the aircraft you’re flying as well as people on the ground. There is normally a total limit of liability, how much the insurance company will pay for any one event, and a passenger sub-limit, how much the insurance company will pay any individual in the aircraft in any one event. When people talk about “smooth” insurance they mean the total limit and per passenger limits are the same. How much liability insurance to buy, check some of the articles further down this page. Mostly the advice is “as much as you can afford”, which is a bit like telling Custer he just needed to shoot all the Indians – good advice, definitely the right solution, but a bit fuzzy on the execution. The one big advantage of liability insurance however is that it enlists the insurance company’s lawyers to defend you in the event of an incident/accident.

Hull insurance is just what it says, if you damage the aircraft you’re flying then hull insurance, up to the limits specified, will pay for that damage. Hull insurance isn’t cheap and right now it’s getting more expensive it seems like by the day. Decide what you fly and determine how much hull insurance you need. Remember, any aircraft will have a minimum scrap value, people suggest as much as 35% of the value before damage, so you won’t owe “replacement cost” on anything you damage, just the difference after scrap value has been deducted.

WARNING – With the high cost of insurance these days some FBOs do not carry hull insurance, they expect you to carry non-owned hull insurance. Most FBOs will make this clear when you start to checkout with them, it wouldn’t be very smart of them not to make this point to you, but be warned, you may want to ask to make sure!

More Insurance Links

Anyway – that’s my information on insurance, a bit more than a few notes. For far more, probably more accurate information, please review these links.