Category Archives: aviation insurance

What happens when you make an engine change?

Posted on July 16, 2014 by Scott Smith

So you’re thinking of making a change.  Many modifications are available for your aircraft, but one of the most expensive (and some claim “most valuable”) is a new larger engine!

Before you run out and borrow the money for that fantastic conversion, check with your aviation insurance agent and see what will happen to your insurance rates.  Typically, they will probably say “I don’t know!”   Engine conversions have not always been a regular thing.  Conversions were always popular with homebuilders, but not with certified aircraft.  Today, more and more people are adding a different sized engine to their aircraft, hoping to increase the performance.

The first and most important question to consider is “is there an STC or will my aircraft be listed as an experimental.  If you are putting an engine in your aircraft that has not been certified or has not went through the FAA supplemental type certification (STC) process you’re asking for an increase in premiums, sometimes substantial.  In my experience, the premiums have increased anywhere from 10 to 25 percent. 

Examples?  There have been a number of companies that have put automotive engines into certified aircraft.  V-8 Chevy engines in a Skymaster, Subaru engines in 150’s and even the Camair engine in a Piper Arrow.  None of these conversions used certified aircraft engines and had their airworthiness certificates modified.  They were reclassified in the experimental category. 

In other cases where the aircraft was using certified aircraft engine and the aircraft was listed in the experimental category, the rate again increased between 10 – 25%.

But what happens if you decide to put a new, bigger engine in your aircraft by way of the STC program?  Numerous companies have engine conversions available that provide increased horsepower without making the aircraft an experimental.  I contacted a few underwriters, in those cases, most said that the premiums would probably not change significantly if at all.  The key here is “as long as it was an FAA approved STC conversion”.

If there were changes, what would they change?  The open pilot warranty might be more restrictive. The deductibles might be higher.  And definitely the value would be different!  But other than that…not much would change.  Of course all of this hinges on the insurance company and underwriter. 

What will you need to do, insurance wise, if you make the conversion?  Whether you convert to a bigger engine or just install a new engine, you need to re-evaluate the aircraft value on your policy.  Most companies will increase the value of your aircraft IF they can prove the higher value based on the aircraft value guides.

So what does this all mean?   Simply, if you decide to change the engine in your aircraft, whether it is the same or different horsepower, the insurance rates should not change if the conversion is done using an FAA approved STC.  The value of the aircraft will change, which in turn will increase the premium you pay.  Besides that, go for it!  The performance should be worth it. 

Airport insurance requirements

Posted on July 2, 2014 by Scott Smith

This is just a quick comment about airports being added to your policy as an additional insured. 

There are few states that require a person to buy aviation insurance.  But the local community can require coverage. 

Not surprisingly there is an increase in the airport requirements that are being asked for.  These requirements use to be just to have the airport listed as an additional insured.   The local community was worried about being protected if someone thought you were liable for something. The airport wants a little extra protection from your policy.  But lately the requests have been expanded to include request for additional named insured, higher limits and even requirements for hull coverage.

Plus now there are management companies that want to be protected too. So not only do you have the city or county but the FBO and property managers. Each time you get asked to add another person to your policy you are basically diluting your coverage. Now you are protecting all those additional insured. No, it’s not the best thing, but its also the way the business works.  You can’t get by without it.

Anyway, these requirements have made the insurance companies start rethinking their premiums.  Each time they add or change the policy they incur some cost.  Some companies add a premium for an additional insured that is not a municipality or governmental agency.  For example, naming the FBO will probably cost you.

And if more and more requests are made for additional insureds, it would not be a surprise to see the rates increase to cover these cost. 

And if they ask for a Waiver of Subrogation… well that’s another story.

Aircraft annuals and the insurance company

Posted on June 11, 2014 by Scott Smith

Thinking of flying your freshly “out of annual” aircraft to the mechanic for the annual?  Check your insurance coverage first!  Many insurance companies will not provide coverage for the aircraft if it is not in a current airworthiness status.

But wait!  It is licensed; it does have a current airworthiness…well not quite!  If the aircraft is out of annual and the owner gets a ferry permit, some people feel that makes it legal to fly.   Sort of.  Yes it is legal, by the FAA, to fly under the restricted permit.  All you have to do is follow the rules. 

BUT…the insurance company doesn’t always agree.  You could have the correct paperwork in the aircraft, the approved pilot and still not be covered.  The insurance policy often has a clause that will not provide coverage for the aircraft if it is not within current airworthiness.  In many peoples opinion this is a gray area of the airworthiness.  Airworthy means different things to the insurance company than to the pilot. 

What can you do?  Call the agent and get a little information.  Ask a few questions.  Check to see if the policy has any language about FAR’s.  Many companies have an exclusion in the policy that will not provide any coverage for any situation where the insured is found in non-compliance with the FAR’s.  We have found a few companies that don’t have any language pertaining to FAR’s (but they do have language that excludes out of annual aircraft).

With an aircraft that runs out of annual during a trip (poor planning for whatever reason) the coverage will probably be null and void.   Don’t put yourself into this type of situation.  The aircraft needs to have a ferry permit issued by the appropriate FAA Flight Standards District Office.  To do that requires that the aircraft have an entry in the logbooks from a mechanic stating that the aircraft is airworthy for a ferry flight.  Most of the time this means it does not have any outstanding AD’s that could jeopardize the flight, the flight has to be “Day VFR” and that only the required crew be on board.  In that situation having your friend fly along is not required.  Getting dual in the aircraft because you have never flown it before might be required for you, but not for the operation of the aircraft. 

If you want to fly and be insured with an aircraft that is out of annual the underwriter can put a note in the insurance company file and you’ll be okay.  Don’t be surprised if they charge you extra for this little bit of service.  If the aircraft has been out of annual for a long time, say over a month; make sure that you have a good relationship with the agent and the underwriter.  It might take a little work for the agent to get the underwriter to provide coverage.  Underwriters don’t like to cover aircraft that have been out of annual for a long time.  The risk is too high for failure and claims. 

If you bought an aircraft that was out of annual, you might not be able to get coverage at all.  Many insurance companies have decided that they will not take on a new risk that is not ready to fly.  That means the aircraft might be a good deal as is, out of annual, but you can’t bring it home insured.  If you want to buy an aircraft in this situation, call the agent first and let him know what the situation is.  We have been able to get coverage in a limited number of cases provided the aircraft has not been out of annual very long and the pilot was qualified to fly the aircraft. 

Whatever the situation, make sure you check you policy before you fly an aircraft that is out of annual… or hundred hour inspection, but that’s a different story.