Flying Without Insurance?

[Parker_Woodruff]

If they are not charging what they need to charge to stay in business then why don't they?

Trying to maintain a market share. Some companies are playing the game and some are tightening the reigns, even at the cost of losing business.

For some companies, aviation is such a small sector of their risk that it doesn't make much difference.

[Bob_Belville]

I will second all that jetdriven has posted. I was not being cavalier when I had a prop strike while slowly taxing across a paved ramp. Since it had been over 30 years since I'd had a claim I was not sure how much hassle I was in for and how much I'd have to pay in deductible, etc. The adjuster has been great and insisted we needed to do everything by the book, engine tear down, prop repair/overhaul/replace. Turns out there's zero deductible for this type claim.

 

I pay $1230 per year including $100,000 hull. (3000 pic, 2500+ in type, sole pilot.)

 

N.b., I had insisted on raising the hull after spending the value of the plane on a new panel. I had to change carriers to do that, the prior carrier would only go to ~$80k on a '66E no matter what I had in it. It was very fortunate that I had raised the hull. If I'd kept it at $60k I would have lost the plane since repairs estimates were over $30k and the salvage value of the un-repaired plane with all the new avionics and the rest of the components the insurance company could have written me a check for $60k and made money on the event. I would have been out over $50k in recent expenses and I would have been without an airplane. ( Had I financed the plane or the avionics I would have had nothing.) 

 

And my agent tells me he would not expect my renewal cost to be affected by the claim.

[BrianBest]

Trying to maintain a market share. Some companies are playing the game and some are tightening the reigns, even at the cost of losing business.

For some companies, aviation is such a small sector of their risk that it doesn't make much difference.

 

When I had 2 trainers leased to a flight school my annual insurance bill for both was $11,160. Some insurance companies charge what they need.

[AndyFromCB]

When I had 2 trainers leased to a flight school my annual insurance bill for both was $11,160. Some insurance companies charge what they need.

 

Trainers/commercial ops are a totally different ball game. Frankly, I was surprised it was only that much. I was looking at doing a leasback for a flight school on a Seneca and the bill was closer to $15,000 so that killed that idea.

[Mooneymite]

Obviously, I'm no insurance guru.  I do understand that insurance has to be a losing proposition for the majority of insureds.  

 

However, as an insured, there are some "peace of mind" issues which are not mentioned in my policy.  Should the "unthinkable" happen to me, I don't want my judgement affected by trying to save the plane because of financial concerns.  Should I have to put my plane down over inhospitable terrain, I don't even want to consider the cost of salvage....just protecting the contents of the cabin (my pax and me).  

 

"Peace of mind" may be difficult to quantify, but it's definitely of value to me.

[scottfromiowa]

It is NOT a losing proposition. It is a payment for reimbursement IF you experience a peril. The whole discussion is weird to me. I don't look at my insurance as "a winning/losing propositon"...It is Insurance...Companies spread their risk and have actuaries that review loss/expected loss...they assign a premium to cover loss, expenses and the rest is profit. Sometimes losses arre higher (Hurricane wipes out a few hangers with planes they insure) and sometimes their employees get a bonus.

Banks are hardly "greedy" for requiring insurance on property for which they extended a loan.

Insurance carriers and banks are in business to provide a needed service...and make money. Their employees and society are better for their effort. We as free citizens can choose (IF we are a good risk) to take advantage of their product/service...or not.

[Mooneymite]

It is NOT a losing proposition. 

 

Well, it is if you expect to get back in cash what you spend in premiums...I hope I don't!

 

That was the point of my post, Scott.  There are intangibles which make it worthwhile even if you never make a claim.

[DonMuncy]

Re: Losing proposition. Sorry about the poor choice of words. I merely meant that in the grand scheme of things, collectively, we will always pay more in premiums than will be paid out in losses, as they must turn a profit to stay in business. 

My point is/was that if one can self insure, money which would have gone to insurance profits will remain with you.

I surely did not mean to imply that  insurance companies should not exist or do not provide a valuable and necessary service.

[marks]

There are certain intangibles about not taking insurance.  Off-island I keep a completely restored BMW 750 V12.  My youngest son wanted to use it to take out a special girl, but I told him there was no collision on the car and I slept well knowing it was locked up.  Perhaps if he had driven it he would attempt to show off.  In church on Sunday we say, "Lead us not into temptation...".  Then there's the old saying about bold pilots and old pilots...  In general it's good to assess the risk before you launch into the great blue yonder.  Of course, life or death is the greatest risk. No insurance can bring you back to life.

[scottfromiowa]

O.K, O.K....agree it is semantics. I just never have any expectation of breaking even/making money on insurance...in fact, I hope/pray I never use/need it. I do feel I am getting a value/not throwing down a rat hole as it is there if and when I need it.

The money for premium does not just go to insurance profits. Insurance carriers must put money aside for potential future claims...for claims that have occurred, but they have not yet received. This surplus is their (and your as a potential claimant) duty to be able to pay claims. They don't throw this in the market...to risky. Everyone knows how much you are getting from savings accounts right now...money is cheap.

A small percentage goes to profits. Premium goes to pay others claims, expenses (salaries, tax, building/rent, auto's for field adjusters, training) etc...

[DonMuncy]

Maybe a little off topic, but fits into the discussion. Back when I worked for Travelers, there were many years that they actually paid out more in claims than they took in as premiums. The investment income from their reserves covered their expenses and a little left over to pay out on claims. Naturally, in this economy, this is not the case.

[ALP]

I understand and respect your decision to self insure your hull. If I understand correctly, the only risk you can't quantify is passenger exposure. How do you contain this area other than only fly on safe days?

Do you have passengers sign a waiver? Do they know? That should be an interesting passenger brief.

[DonMuncy]

ALP,

If that is directed at me, I don't self insure my hull and I certainly don't self insure my liability. I don't even self insure my $30,000 car. I started out with the proposition that if the $ risk is low enough, self insurance is cheaper, This is based on statistics, not on any individual case.

I apologize. I have posted so much on this subject, I am beginning to sound like I'm arguing. I must not have enough to do. Sorry.

[Marauder]

ALP,

If that is directed at me, I don't self insure my hull and I certainly don't self insure my liability. I don't even self insure my $30,000 car. I started out with the proposition that if the $ risk is low enough, self insurance is cheaper, This is based on statistics, not on any individual case.

I apologize. I have posted so much on this subject, I am beginning to sound like I'm arguing. I must not have enough to do. Sorry.

I don't think his comments were directed at you. The original poster I believe.

[ALP]

Don,

That was directed to marks. I find this thread interesting compared to the normal topics that get beat to death. I am all about controlled risk. I was questioning how marks controls his exposure to passengers since he noted this was the area of unknown risk.

I understand and respect everyone's position. I personally don't insure old cars for collision, I don't purchase extended warranties or lottery tickets buy I do insure my hull.

To each their own.

Al

[Z W]

Most financial planners will tell you to insure only that which you cannot afford to lose.  The average consumer pays more in premiums than he receives in payouts.  So, you should not insure your toaster with a paid warranty.  But you definitely should insure your home.  If it burns, you have to buy a replacement, and you likely have most of your net worth stored in it.

 

Planes are somewhere between the toaster and the home.  Many of us I suspect cannot "afford" to lose our planes.  They represent too large a portion of your total net worth.  You may someday need to sell the plane and recoup that money to meet basic living expenses.  If that description fits you, then hull insurance makes sense.  On the other hand, if you've got 2% of your net worth in the plane, you probably don't have to have hull insurance.

 

The other unknown factor here is that the risk of loss is not equal among pilots and planes.  You can identify your own risk tolerance; You can't honestly know your risk exposure.  Some pilots are just more likely to bend metal than others.  You won't know until your day comes.  Buying hull insurance allows you to pool that risk with all the other pilots.

 

I've got hull insurance now.  I can see a day in the future where I might drop it.

[ArtVandelay]

I guess it depends on what % of the value of the plane is the premium, if 1%, maybe worth it, if 10% no way, so where is the break even point? 3% 5%??

[Parker_Woodruff]

When I had 2 trainers leased to a flight school my annual insurance bill for both was $11,160. Some insurance companies charge what they need.

And the use was likely Instruction and Rental and not Pleasure and Business.

And chances are...it still may not have been enough.

Instruction and Rental claims were quite plentiful when I was in the biz

[marks]

To answer the question about passenger risk;  I haven't flown a passenger beyond my own family in more than a year now.  In fact, where I originally did my primary training they will no longer allow any of their instructors to give me a BFR because I don't carry this type of insurance and they know it.  In the past I did use a waiver in case I needed to fly with one of my clients.  The waiver stated that among other things; "flying in small airplanes exposes the passengers and pilot to considerably more risk than flying on scheduled airlines, yet I agree to accept this risk and hold (the owner/pilot) harmless from all claims and I assert that I have secured the necessary insurance and other securities to rely upon in the event of any accident that causes injury or death.." etc. etc.  I simply told them that my lawyer had prepared the waiver and that I needed them to sign it if they wanted to fly with me.

[marks]

BTW, I personally believe that most pilot/owners don't carry enough liability insurance to carry passengers.  Back on Sept. 12th 2012 a young instructor took his student to land at Falmouth Airpark on Cape Cod.  The student owned the Cirrus SR22 and his wife sat in the back.  The runway is 2,298 ft long and 40 ft wide with tall trees on the right, the left and at both ends.  The plane ran off the left side of runway 7 across the grass and into trees.  The instructor was killed and the owner and his wife were so badly injured and burned that neither of them could be interviewed.  How much insurance do you think you'd need to cover all the lifetime medical claims, along with lost income claims and for pain, suffering, permanent injuries and disfigurement?  Do you think you have enough insurance to take along a couple of passengers if this type of accident happend to you?

[AndyFromCB]

To answer the question about passenger risk;  I haven't flown a passenger beyond my own family in more than a year now.  In fact, where I originally did my primary training they will no longer allow any of their instructors to give me a BFR because I don't carry this type of insurance and they know it.  In the past I did use a waiver in case I needed to fly with one of my clients.  The waiver stated that among other things; "flying in small airplanes exposes the passengers and pilot to considerably more risk than flying on scheduled airlines, yet I agree to accept this risk and hold (the owner/pilot) harmless from all claims and I assert that I have secured the necessary insurance and other securities to rely upon in the event of any accident that causes injury or death.." etc. etc.  I simply told them that my lawyer had prepared the waiver and that I needed them to sign it if they wanted to fly with me.

 

A waiver like that is not worth the paper it's written on. You simply cannot sign away the rights of the estate.

[jetdriven]

Waivers also don't cover claims brought forth by the family of the injured or deceased.

[marks]

I was certain that I would hear the "waiver has no power" issue, however this one was designed to act as a conditional codicil against the estate of the passenger.  It was too difficult to rely on in Massachusetts because we couldn't easily identify the will of the client or if the client had already enacted Personal Real Estate Trusts or other Irrevocable Trusts leaving the estate nearly empty.  Also the signatures of disinterested persons made the routine use of the document difficult.  So I gave it up.  Strictly speaking it wasn't a waiver at all.  A person certainly can leave part of his estate under certain conditions to certain people.  One lawyer I knew simply wouldn't sign it, so he took the bus from Hyannis to Woods Hole and then the ferry.  

[marks]

While you can't sign away the rights of the estate, you can always give part of your estate to someone to settle a debt or defend against an action. (I knew this would cause all the armchair attorneys out of the woodwork.)  So let's just say it wasn't worth the paper it was written on.

[DS1980]

None of this flying without insurance thing seems right. I'm surprised that in an industry with little margin for error and consequences beyond bent metal that there are pilots who chose to take on unwarranted risk. I don't believe the ramifications are understood, and the end-game of saving money would seem trivial if the unexpected happened. I get the fact that he has liability insurance for passengers, but the first hospital stay would negate any benefits.

 

So is the bet that the pilot will never make a mistake and that the engine will never quit, and if it does there will be nothing hard to hit within miles?

 

Of course, I'm also probably more risk adverse than Scott. I first got into Mooneys not because of the speed or efficiency, but because of the strength of the airframe.