Aviation is an industry where planning and preparation are fundamental to successful outcomes. No pilot should ever take off without a carefully considered flight plan, a thorough safety check and complete confidence in the airworthiness of the aircraft. Similarly, no private jet owner should put aircraft into operation without insurance, which gives them full confidence that their expensive asset is protected financially from any type of loss and that they are shielded from the potentially high cost of legal liability.
For seasoned owners and those acquiring their first private jet, understanding the intricacies of aviation insurance is not simply a formality. It is a cornerstone of responsible ownership. This article addresses the critical topic of aircraft insurance, explaining what it is, what it covers, why it is indispensable and whether there are any legal requirements.
Essential Protection From Many Types of Risk
Purchasing a private jet requires a substantial investment that is often in the millions of dollars and can easily reach tens of millions. Like any high-value asset, an aircraft is exposed to a wide range of risks that can result in significant financial losses if not properly mitigated. Private jet insurance acts like a financial shield, protecting you from unforeseen circumstances that could otherwise have catastrophic consequences.
Some of the potential scenarios every aircraft owner faces include:
Accidental damage or a total loss
An incident during takeoff, landing, towing or even while parked in a hangar can cause extensive damage or even a total loss of the aircraft. For damage that can be repaired, the cost can be significant. If you don’t have insurance, this expense falls on you.
Passenger injuries or fatalities
As an aircraft owner, you have both a moral and a legal obligation to protect your passengers, whether they are family, friends or business associates. If an accident leads to injuries or fatalities, you could face liability for medical expenses and court-awarded damages.
Third-party liability
Even in a situation where your aircraft doesn’t sustain significant damage, you can have costly liability for injuries to third parties and damage to their property. For example, imagine your pilot clips the corner of a hangar while taxiing. Your aircraft suffers minimal damage, but the incident leaves the structure unstable and a portion of it collapses, damaging additional property and injuring a bystander. The costs from the incident, including lawsuit damages, settlements and medical expenses, could be staggering.
Loss of use
Aircraft damage can take weeks, months or longer to repair. If you use your private jet for business purposes, a lengthy repair could mean a significant disruption to your operations, including missed meetings, lost business opportunities, etc. Some policies can compensate an owner for loss of use.
Theft or vandalism
This risk may be minimal for aircraft secured in hangars, but issues can still occur. Insurance policies can cover costs from theft or vandalism.
To summarize, private jet insurance provides financial protection against physical damage to your aircraft and legal liability for property damage or bodily harm caused to others, including your passengers. Having insurance allows you to operate your aircraft without worrying about countless “what if” scenarios.
Types of Aircraft Owner Insurance
There is no one-size-fits-all aircraft owner’s insurance policy. Each owner’s situation is unique, so it is crucial to understand the different types of coverage available. That requires doing research based on the type of aircraft you own, how you use it and other factors, and it should ideally include a conversation with an insurance professional.
However, as a foundation for your research, here are summaries of the primary types of aircraft insurance:
- Hull insurance. This is the main coverage for physical damage to your aircraft. It protects against a wide range of risks, including accidents, collisions, fire, theft, vandalism and natural disasters.
- Liability insurance. As the aircraft owner, this coverage protects you against legal claims due to bodily injury or property damage caused to third parties. In this context, that means people or property outside the aircraft.
- Passenger legal liability (PLL). This insurance covers claims by passengers in the event of injury or death. It is distinct from third-party liability as it addresses those aboard the aircraft.
- Combined single limit (CSL) coverage. Many private jet owners prefer CSL coverage as it provides comprehensive protection. Rather than having separate limits for bodily injury, property damage and passenger liability, it has a single, overarching limit for all liability claims arising from an incident. This flexibility means funds can be allocated across different claim types.
In addition to these main insurance types, insurers offer other coverages that might be beneficial based on your circumstances. They include hangar keepers liability, non-owned aircraft liability, aircraft unavailability insurance, personal injury protection and war risks coverage. Researching these coverages or discussing them with your aircraft insurance provider is advised.
Is Aircraft Insurance Required?
Unlike the fairly standard requirements for minimum coverage on automobiles in most states, private jet insurance requirements are more variable and nuanced. There is no universal federal or state regulation in the U.S. that requires all private aircraft to carry insurance. However, that does not mean coverage is optional.
Many entities require private jet owners to have insurance for their aircraft. For example, fixed-base operators (FBOs) that provide services like fueling at airports typically require proof of insurance before an aircraft can use their facilities. Financing and leasing companies generally require insurance as well. They expect owners to have hull and liability insurance at a minimum to protect their interest in the asset. Consequently, many private aircraft owners choose to carry insurance for liability and damage protection even though it is not universally required by federal law, and state requirements vary.
FAR Part 135 (Federal Aviation Regulations for commuter and on-demand operations) does not explicitly require aircraft insurance. However, while the FAA (Federal Aviation Administration) does not mandate liability or hull insurance for Part 135 operators, there are practical and regulatory reasons why most operators still carry insurance.
So, although aircraft insurance is not always mandated, it is wise to think of it as required. Failing to have insurance can lead to the grounding of your aircraft and significant financial exposures.
Peace of Mind for Aircraft Owners
Acquiring and operating a private jet is a complex endeavor. In addition to carrying adequate insurance, it involves financial planning and ongoing management. It also requires regulatory compliance and maintenance oversight. That is where Axiom Aviation comes in, providing peace of mind for those buying or selling private jets.
We serve as your trusted advisor throughout the ownership lifecycle, providing in-depth aircraft and market reviews and vetting of industry partners and other services. In short, our team simplifies private jet ownership.
If you are considering buying a private jet, we encourage you to let us perform an assessment of your travel needs and identify the ideal aircraft. If you are ready to sell a private jet, we can assist you in finding the right market and buyer so you get the most value for your asset.
Ultimately, our guidance helps ensure that your aircraft perfectly addresses your requirements and that your ownership experience exceeds your expectations. Reach out to learn more about our aircraft sales & brokerage, acquisitions, project management and consulting.