Clear on Top

All too often, when making an insurance coverage decision, we are misdirected by supposition, bad advise or our appetite for a desired outcome. In this series we will discuss some of the more common misconceptions of the often misunderstood aircraft insurance policy.  In reading some of these blogs, you may think the answer to a question is obvious.  You may think, who would ask such a stupid question?  Let me assure you, each topic is the result of a question from one of our clients or prospects.  We welcome any discussion regarding aviation insurance matters.  Keep in mind, the only truly stupid question is the one that is never asked.

In discussing the method of settling an aircraft hull loss with an insured, I get the response, “It won’t matter to me. I won’t be alive to care.” It might be of interest to know that very few general aviation crashes result in fatalities. In most cases, the hull claim is settled as a partial loss and the aircraft is repaired and returned to service. The next most frequent circumstance is the constructive total loss. This is a situation requiring such extensive repairs that the repair cost plus the salvage bid (taken from a salvage buyer) exceeds the insured value of the aircraft. In this case, the insurance company will pay the insured for the aircraft as required by the policy and sell the salvage to a salvage buyer. The net loss to the insurance company will be the difference. Many aircraft owners say, “I want the insurance company to pay me the agreed value of my aircraft and then allow me to buy back the salvage and have the aircraft restored”. “Its my aircraft, I don’t want to sell it to a salvage buyer.” Your insurance contract ( your policy ) gives the insurance company the option to repair or replace your aircraft at the company’s option. If the company pays you the agreed hull value as stipulated in the policy, the salvage becomes the property of the insurance company and the policy commitment is complete. Basically, you sold your aircraft for the amount agreed to in the policy. The company owes you no courtesy or preference in retaining the salvage. Some companies will allow an insured the opportunity to bid on the salvage, but no preference is given. As stated in one insurance company’s policy; “If we decide to take the salvage, we can sell it or do whatever else we want with it.”