viation insurance is a critical facet of doing business at Security Aviation. The Anchorage air charter company maintains a fleet of eight aircraft: one Learjet 45, four Cessna Conquests, and three Piper Navajo Chieftans. Each year, Security Aviation’s pilots fly 2,500 to 3,000 hours in Alaska, Canada, and the Lower 48. And the company pays approximately $445,000 annually to insure its planes, passengers, and other assets. “It’s an expensive cost of doing business,” says President and CEO Joe Kapper.

Aviation insurance is vital in Alaska, where airplanes are as commonplace as pickup trucks in Texas. Alaska has six times as many pilots per capita and sixteen times as many aircraft per capita as the rest of the nation.

Aviation insurance is geared specifically to the operation of aircraft and the risks involved in the aviation industry, but what determines the insurance needs of an aviation company varies, according to Lee Bridgman, a small business account executive at RISQ Consulting. As a full-service insurance broker and Acrisure agency partner, RISQ Consulting has extensive access to aviation insurance markets. The factors that impact insurance needs include the type of services that the company provides, kind of aircraft owned, number of passengers transported per aircraft, the type of cargo that is carried, where the aircraft normally operates (major airports, remote airports, or Bush facilities), and the aircraft’s use (scheduled or charter operations).

There’s a range of aviation insurance available, but the most important kind of coverage is aircraft liability, Bridgman says. Aircraft liability provides coverage to others for bodily injury or property damage in the event of an “occurrence” that the insured is legally obligated to pay for. “An occurrence can be anything from an ‘in-flight event’ to a taxiing event or even a plane being blown into another aircraft during a windstorm,” he explains. “While this coverage provides coverage for others, it also provides coverage for any passengers as a sub-limit as defined in the passenger bodily liability limit.”

However, Bridgman points out that commercial operations may have their liability limits or other coverages dictated by contractual commitments.

Other lines of coverage that could be a part of an aviation company’s policy are passenger bodily liability, medical expense, hull coverage, ground-not-in-motion, and cargo and baggage.

Passenger bodily liability, as the term indicates, provides payment for a passenger’s bodily injury for which the insured is legally obligated due to an occurrence arising out of the ownership, maintenance, and use of the aircraft. “Varying limits of coverage for passenger bodily injury are available and should be based on the number of passenger seats that the aircraft is configured for,” Bridgman says. “The passenger bodily injury limits are also restricted by the aircraft liability limit.”

Security Aviation, for example, opts to carry higher liability limits to cover its passengers, who include CEOs, government officials, and Hollywood producers. “Because of the caliber of the people we typically fly, they require higher levels of liability insurance,” Kapper says. “We carry up to $100 million of ‘smooth’ coverage. So if you have one to nine people on board, there’s $100 million available for payout for all of them [collectively]. The state limits for insurance are at $350,000 per seat.”

Medical expense—which can include or exclude the crew—is the first coverage that will respond for each passenger who sustains a bodily injury in an occurrence.

Hull coverage or physical damage coverage protects the aircraft itself. The coverage can be written via two methods, with hull coverage while in flight providing the best protection. “In an occurrence while taxiing or in flight, it will pay for any physical damage to or loss of the insured aircraft, including recovery,” Bridgman says.

Ground-not-in-motion or ground coverage strictly pertains to the loss of an aircraft while it’s tied down (even on a sand or gravel bar) or in a hangar. Coverage ceases once the aircraft is towed, taxied, or in flight. This is a type of coverage that some private pilots may find more affordable, although it has very limited hull coverage for the aircraft.

Cargo or baggage coverage is common for commercial operations. This coverage pertains to cargo while in the aircraft and the personal belongings of the passengers.

Other coverage options for pilots and commercial operations to consider include coverage for spare parts, airport premises liability, hangar coverage for the building itself, and breach of warranty for a lienholder.

In addition to having insurance to protect its passengers and aircraft, Security Aviation also carries coverage for two shuttle vans and a flatbed pickup truck. And as part of its benefits package, the company provides health and life insurance for its twenty-eight employees.

Whether aviation companies operate large cargo aircraft or small Bush prop planes, there are some key considerations they should make when choosing coverage. “The biggest question they should ask themselves is what the assets of the individual or commercial business are,” Bridgman says. “Then they should decide on the liability limit level to protect those assets. Then they need to decide how to work that into their budget, so they can afford to insure the hull of the aircraft.”

He adds: “When discussing the coverage, I want them to consider the aircraft as a retirement investment. Years down the road when they are ready to sell the $80,000 to $250,000 or more aircraft, they do not want an occurrence to cause a total loss to the aircraft days from the sale closing date.”

Bridgman emphasizes that most occurrences in Alaska are not small claims; the recovery of the aircraft is potentially a large expense, as are the transportation and medical care of injured passengers. If there is not any hull coverage for in-flight, then the insured party becomes responsible for the aircraft recovery.

As another important consideration, drone (unmanned aircraft) use is excluded from commercial policies, general liability, property, and auto. Bridgman explains: “If you use a drone and cause bodily injury or property damage to others, your commercial policies will not respond to the claim. This would include the charging of a drone battery that may overcharge and catch fire or damaging a building [for example]. In order to cover the use and storage of a drone, you would need a UAV/UAS [Unmanned Aerial Vehicle/Unmanned Aircraft Systems] liability policy. I would recommend contacting your personal lines carrier to see how they would respond.”

Individuals or businesses that need aviation insurance can purchase coverage through an agent or directly from an insurance company. For instance, Avemco Insurance Company, which is headquartered in Frederick, Maryland, has been selling aviation insurance in Alaska since 1982. Avemco serves as the only direct writer of aviation insurance in Alaska, according to Senior Vice President of Underwriting Mike Adams. “When a customer calls me with a question about their policy or coverage, they’re getting information directly from an insurance company, not from an agent,” Adams says.

Avemco provides coverage for many types of non-commercial flying aircraft with some exceptions. “We don’t insure anything that’s turbine powered,” Adams says. “Our specialty is in fixed-wing, personal-use aircraft, be it an experimental, glider, a seaplane, or on skis.”

Insurance options from Avemco include general liability to cover people inside and outside the aircraft, property damage to cover items not under the custody or control of the pilot or policy holder, and physical damage to cover the airplane. The company also writes a non-owned aircraft policy for clients who are renting or borrowing a plane, as well as a storage policy to protect parked planes against non-flying or ground losses.

There is also a special insurance option for individuals who are building their own airplane. Avemco can write a construction policy to provide comprehensive coverage for kits and components. “This would apply to someone who’s not in a business and is building a plane for their own education and use,” Adams explains. “The owner can change the value as they spend more for kits and components. For example, they could start the policy for $25,000 and add another $20,000 when they add an engine.”

Avemco also includes premises coverage—at no extra charge—with its aircraft policies for the hangar or tie-down that normally stores the airplane. This is an important bonus, as more airports are requesting proof of additional insured status, according to Adams.

Regardless of the kind of insurance involved, Avemco allows clients to modify coverage based on their evolving needs. “We’ve got pretty good flexibility,” Adams says. “If someone starts their insurance [with their aircraft] on wheels or skis and moves to floats, we can make all those changes with just a phone call and adjust the premium.”

In terms of cost, premiums for aviation insurance are based on several factors, including the number of aircraft, number of pilots, limits of liability, passenger liability limits, hull value (or no hull coverage), pilot hours, loss history, type of use, and type of landing gear.

Aviation insurance may seem to be relatively expensive compared to insurance for other industries—but, as Bridgman explains, “When you compare liability and hull coverage premium versus liability and property coverage for a building or physical damage for an automobile of equal value, then the premiums are comparable. When you consider that you may only fly the aircraft twenty to thirty hours a year, for private pilots, then it is more expensive.”

He continues: “The comparison becomes greater as the hull value increases; however, the aircraft that has a high hull value is most likely used in a commercial operation. These commercial operations may be a charter pilot that logs 200 to 400 hours or a scheduled operation that exceeds 1,000 hours a year.”

Insurance premiums at Security Aviation are definitely impacted by the type of plane, type of runway, flying status, and a variety of other conditions. For example, it costs the company less to insure a Lear 45 jet than its other planes because the jet flies from safer asphalt-to-asphalt runways. Incidentally, about 85 percent of the runways that Security Aviation flies into in Alaska are gravel.

However, Security Aviation’s insurance carrier offers several benefits to help reduce premiums. “If you don’t have any claims during the year, there’s a return on premium,” Kapper says. “If you have airplanes out of service for thirty days in a given quarter, they will give you a lay-up credit.”

Insurance premiums at Avemco are also influenced by a variety of factors. As an example, an experienced Alaska pilot in Avemco’s most preferred category could pay $4,000 a year for $1 million worth of coverage on a Cessna 206 that’s on floats and valued at $180,000. On the flip side, an inexperienced student pilot could pay $3,000 annually for a half million dollars of liability insurance for a two-seat airplane (with $30,000 coverage included for damage to the airplane).

Many of Avemco’s customers in Alaska elect to purchase only liability coverage, Adams says. The resulting premium is significantly less, running about $800 a year for pilots with 300 flying hours.

As with auto insurance, accident rates are a major factor when it comes to aviation insurance costs. And in Alaska and other places, one of the leading causes of aviation accidents is loss of control during landing. “It’s the person who thinks they are little better than they are who seems to get into trouble,” Adams says. “Or they don’t appreciate the limitation of the airplane—that gets them into trouble.”

Adams extends three pieces of advice to help people minimize accidents: know your own abilities, know the aircraft’s capabilities, and train often with a flight instructor. “The aircraft owners with an honest assessment of their own ability who respect the capabilities of the plane and who train regularly tend to have a lower accident rate,” he says. “If we can get the new entrants into aviation thinking more about risk management, an honest assessment of their abilities, and the constant training of their skills, we should see some type of decrease in the number of accidents.”