December is insurance-renewal time for me. Fortunately, this year it’s reasonably good news.
How airplane insurance works
There are two main components to aircraft insurance:
- liability insurance, which covers claims from people other than you (such as passengers and people on the ground); and
- hull insurance, which protects the value of your plane (some combination of in the air, on the ground in motion, on the ground not in motion, or usually all three).
Liability insurance for a private plane tends to be fixed at around $500-700/year for $1,000,000 coverage, as far as I can tell. It’s not too much, because (accident stories aside), pilots rarely hurt passengers or people on the ground. Liability insurance is required in Canada, even for visiting planes from the U.S.
Hull insurance is a percentage of the value of your plane, I think typically 1.5-3%/year, depending on the type of plane, your experience, etc., and is entirely optional — if replacing your plane wouldn’t be an extraordinarily large expense for you, then financially, you’re better off without the insurance (as with anything). Most of the claims don’t have to do with dramatic crashes but with taxiing collisions, wind/storm damage while tied down, wheel-up landings (for retracts), ground loops and wing damage (for tail draggers), etc. Planes are unbelievably expensive to fix, and what looks like a couple of tiny dents can sometimes result in a complete write-off.
When comparing the cost of insuring different planes, it’s important to take hull value into account. For example, if the hull insurance costs 2% of the hull value, then you’ll pay $1,200 hull on a plane with a declared value of $60,000, but $8,000 hull on a plane with a declared value of $400,000. That, and not their safety record, is the main reason that new planes like the Cirrus are so expensive to insure: it costs a lot more to replace a more expensive plane (duh).
The failing U.S. economy and the aircraft owner
Although most Americans don’t realize it, their money has lost a huge chunk of its value over the past few years (about 30% against the Canadian dollar, and much more against the Pound and Euro), so everything priced in American dollars (including their houses, planes, boats, cars, and shares) is worth less than it used to be: a U.S. stock that was worth USD 100/share five years ago has to be priced at about USD 125/share now just to break even in Canadian terms (more in Europe), and that’s still providing $0 capital gain. Used planes are priced primarily in US dollars, so their real value has been tumbling in recent years, even if the US sticker price looks about the same. As a result, we Canadian airplane owners are taking a bath — the only good news is that since our planes are worth so much less, they’re cheaper to insure (it’s also cheap to buy up, if you’re so inclined).
This year’s damage
My insurance cost has been declining gradually since I bought the plane due to my increasing experience and ratings, but the fall in the U.S. dollar (and subsequent drop in my plane’s resale value) has accelerated things. This year, I’ll be paying only CAD 1,520 to insure my Warrior for hull and liability, down from about CAD 2,300 when I bought the plane in 2002 — the drop in the plane’s value due to the low U.S. dollar accounts for $200-300 of that, and some of the rest might come from my having passed the magic 500 hour mark last year. Now I have to keep my fingers crossed for a cheap annual inspection as well.