Flying Without Insurance?

[marks]

I've been flying since 1984 and only purchased hull insurance for two years.  My company has an unbrella policy for me that covers liability (but not passengers).  I've not only saved about $60,000, but I collected more from insurance that my plane was worth.  Back on Oct. 15th 2004 a mechanic fixed a hot mag for me but failed to reconnect the fuel pressure gauge and fuel was spraying into the engine like perfume from a perfume bottle.  The engine stopped and I crashed the plane on a golf course.  The first thing the adjuster for the mechanic's insurer asked me was how much I had agreed my airplane was worth on my own insurance.  I told him I had no insurance and the plane was worth $150,000,  Of course my old Beech Sierra was probably worth $72,000, but after I signed a waiver holding the mechanic harmless if I ever suffer trama, such as back pain, I was paid $85,500. My original thought was that uninsured losses would be deductible against gains, but as it worked out I was paid an $85,500 settlement that wasn't taxable at all.  How can people fly for 30 years and think that they could possibly come out ahead with the insurance companies?  Am I the only one?  BTW, I never have carry collision insurance on my cars either, even when I buy brand new.  Tell me that I'm stupid if you think so. 

[Alan Fox]

Not stupid , just lucky.....

[marks]

I think if you buy insurance you'd have to be very, very lucky to come out ahead!  Frankly, I've never heard of it ever happening over a lifetime.  Subtract your deductible and the premiums and the tax deductions for uninsured losses and I don't see how you could ever come out ahead buying insurance.  I'd love to hear from anyone who thinks the practice of buying insurance has helped them out over a lifetime.

[Rwsavory]

You don't buy property and liability insurance to "come out ahead." You buy it to limit your exposure to the insured risk. If you enjoy being "self-insured," more power to you. For me insurance is cheap compared to the risk of coming out of pocket for an airplane - a second time. YMMV.

[scottfromiowa]

Nope, but I transfer risk and sleep better at night. Do you insure your home? Your life, your health? I buy insurance because i want to transfer the risk. I am risk adverse. I won't submit a small claim either. I have high deductibles on my auto's and health insurance. When I went to Vegas years ago with my wife she said "here is $300 bucks to gamble with over next three days". I put it all on red and we ate for free...I am no gambler and I buy insurance for catastrophic loss.

Others do as you wish (accepting risk) I was lucky once in Vegas...I do not wish to gamble my wife and children's well being.

[Marauder]

I think if you buy insurance you'd have to be very, very lucky to come out ahead! Frankly, I've never heard of it ever happening over a lifetime. Subtract your deductible and the premiums and the tax deductions for uninsured losses and I don't see how you could ever come out ahead buying insurance. I'd love to hear from anyone who thinks the practice of buying insurance has helped them out over a lifetime.

Well, it happened to my family. If it weren't for insurance, I would still be paying for medical bills from an uninsured driver.

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[BorealOne]

marks, do you fly with passengers, knowing that you have no insurance in the event of liability arising to them?

[marks]

If you have to buy an airplane a second time out of pocket (or with a home equity loan) instead of paying premiums for thirty years and then losing the deduction for uninsured losses, you should come out even.  I do buy cheap term-life, so if I die in a plane crash my family is protected because my practice is worth far more than my airplane.  (I am a Financial Advisor.)  I do carry medical insurance because the losses can't be managed like the loss of an airplane.  I really brought up the topic because vehicle and hull insurance can't truly save your family from disaster unless you own a very expensive airplane or car.  On the other hand, I have made a great deal of money selling portfolio insurance and life insurance.  There's no question that people want it.  Personally, I have always considered premiums as losses.  You give them the money and you don't get it back - that's alot like losses. Over the years the losses can add up to the value of your plane and then some.  I'd hate to lose $2,500 every year.

[marks]

I almost never take on passengers from outside my family.  However, I have taken that terrible financial risk on a sunny no-wind day a few times.  But then again, some of us take the risk of death in an airplane by flying a single engine at night over mountainous territory.

[Rwsavory]

The fallacy in your analysis is in assuming there are no accidents during the 30 years.  You have "managed" that risk by being lucky.   May your good fortune continue unabated.  

[aaronk25]

What if you ditch in a lake and DNR says they want it out of the water within 48 hours, who will pay the bill? Might be expensive.

[Danb]

Mark. Your a financial planner. CFP. .?

[Hank]

What if you ditch in a lake and DNR says they want it out of the water within 48 hours, who will pay the bill? Might be expensive.

Or taxi a wingtip into an airport sign, building or composite aircraft (think Cirrus)? Or set it down somewhere like a golf course or subdivision without having an insured A&P ready to take the blame? What if your off-airport landing stops in someone's house, because you ran out of fuel, the vacuum pump died, you just blew the approach or the engine crapped out from a spalled camshaft?

Goodbye airplane, goodbye house, hello garnished wages. This is if no one on the ground is seriously injured; in that case, all bets are off!

[BrianBest]

Over 4 years I had three different planes that I leased to a flight school. One was totaled (on the ground no injuries), another had a significant prop strike (no injuries). As a result of the prop strike I got a new prop and an engine overhaul.

 

Including deducting the insurance premiums as a business expense I might have come out ahead. I certainly came out way ahead of where I would have been without insurance. That was a relatively short term experience and I haven't tried to calculate exactly, but I probably came out ahead.

[midlifeflyer]

I think if you buy insurance you'd have to be very, very lucky to come out ahead!  

 

You'd consider yourself "lucky" if you had enough accidents and caused enough damage to come out ahead on insurance ????As in, "I killed someone and my insurer had to pay the whole $2MM smooth! Hooray!"

 

Of course, if we're only talking about hull insurance, that's a different issue entirely.  I know people who simply decided the risk of damage to their own airplane was low enough and manageable enough that they were willing to take it. Just as people do with their cars.

[marks]

Remember, I have an umbrella policy that would cover me if I smashed into someone's house and/or hurt someone on the ground.  Back in 2004 when I crashed on the Hyannisport Golf Course during the Robt. F. Kennedy Golf Tournament I paid out of pocket $6,100 to have the plane's wings removed and a crane to remove the airplane from the course.  My settlement was just for the airplane.  All expenses were also reimbursed to me, but the damn insurance company wouldn't give me ten cents until the the NTSB report was completed almost seven months later.  So you need to have the money to self insure.  Dan - I worked for Prudential Securities which ultimately became Wells Fargo Advisors, then in 2009 I moved my practice to Martha's Vineyard from where I had been flying to Cape Cod daily for fifteen years.  I am not a CFP.

[Hector]

It's called 'insurance' for a reason right? You are paying for the peace of mind that if something bad happens (destroy your airplane, damage property, and hurt people) you will not be financially ruined. I don't have any expectations that I'm paying insurance so I can come out ahead. I pay so that if the worst happens my family will not have to suffer because of my passion for flying.

[Alan Fox]

I like the way he "discounts" the benefit of having insurance , You pay for a service that you may or may not use .... But its there and thats what you pay for......

[Marauder]

Mark. Your a financial planner. CFP. .?

How did you know?! Remarkable!

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[marks]

Hey remember, I'm only talking about hull insurance and comprehensive insurance to cover auto body damage.  I truly hate taking poor risks.  In my entire life I've never bought a lottery ticket nor have I ever been inside a casino anywhere in the world, but I've driven by their front doors many times.  I'm sure a few of you have purchased hull insurance and been happy.  As for me, when the wind gusts up to forty I begin to think like an insurance company and I avoid exposing myself to risk by taking the plane up that day.  Act, invest, and insure prudently and things will work out fine.  - BTW if I killed someone on the ground I'm covered for more than 2MM smooth and of course I wouldn't want to hurt anyone.  It's just that I think most accident insurance designed to fix your airplane is a poor investment.  I'm sure we could ask for stories of bad insurance company experiences and fill up many pages.  

[Hector]

It's all about risk management. It pays off for some and not for others. Within the last few days someone here posted about his bad luck in having his nose landing gear collapse twice in one year. I bet he thinks hull insurance has worked out well for him!

[marks]

I agree with Hector. It will pay off for some and not for others.  Also, if you self insure hull insurance, it will pay off for most but not for most others.  If you have no insurrance for true disasters, it will pay off for most and completely bankrupt others.  My decision could never bankrupt me.  I was wondering if anyone would accept the risk that I have, but so far no takers.  

[Mooneymite]

Hmmmmm.

Strange thread. I'm a little mystified.

I carry insurance to fulfill my obligations to others. If I crash, how could I "make whole" others who might be harmed?

Even if I die in the crash, I'm responsible to others.

Garnished wages (at my meager salary) would never cover a big, destructive accident's cost.

[ALP]

Don't let the thread title mislead you.

He carries liability insurance to protect others he may harm, but chooses to not physically cover his asset (plane). There is nothing wrong with this. He has enough assets that to loose the plane with his own actions would not  affect him. Just buy another one tomorrow.

The plane is obviously paid for otherwise the lender would insist on being covered.

[carusoam]

I have the "same" theory on old junk cars... Once the note is paid and they don't have much value left, but they still run.

They are covered if I injure somebody else. But they go to the junk heap without a tear if I back them into a post. At least the post is covered.

I have a couple of junky cars... And teenagers to drive and abuse them as they gain experience...

As far as the plane goes, I can afford one. Can't afford to replace it.

And would be really dissapointed if it got hit by an uninsured vehicle (not you, the really uninsured)....

Yes, I've seen the results of one plane running into another, wind moving planes about and the like...

Yes the insurance is a loss, but losing my plane would be worse. Even a simple ground strike has become incredibly expensive.

I think you and your situation are uniquely well thought out. But, your a Mooney pilot. Did you expect to fit the mold of other Mooney pilots?

Best regards,

-a-