Insurance valuation

[Browncbr1]

It’s insurance renewal time and I need to update my hull value after upgrades.  Im just not really sure what my plane is actually worth now.   Also, what are everyone’s thoughts on valuation based on replacement vs market selling value?   

67’ F jbar 

Gtn650, dual G5s, edm830, ps pma8000, insight strikefinder, kx155, Brittain hdg/nav/alt AP,  A1A engine with 700smoh, top prop with 300 since new, a little hail on the ailerons and little rash here and there, paint is decent.  Very nice new custom leather interior. LED landing light, brake reversal, no windshield or cowl mods.    No corrosion, no squawks.  

Any ideas or suggestions?   I was thinking to put a hull value down around $80k??

[mooniac15u]

1 hour ago, Browncbr1 said:

It’s insurance renewal time and I need to update my hull value after upgrades.  Im just not really sure what my plane is actually worth now.   Also, what are everyone’s thoughts on valuation based on replacement vs market selling value?   

67’ F jbar 

Gtn650, dual G5s, edm830, ps pma8000, insight strikefinder, kx155, Brittain hdg/nav/alt AP,  A1A engine with 700smoh, top prop with 300 since new, a little hail on the ailerons and little rash here and there, paint is decent.  Very nice new custom leather interior. LED landing light, brake reversal, no windshield or cowl mods.    No corrosion, no squawks.  

Any ideas or suggestions?   I was thinking to put a hull value down around $80k??

Insurance hull value has very little to do with market valuation.  It's whatever you can convince them to write the policy for and are willing to pay the corresponding premium. 

[gsxrpilot]

I believe insurance needs to be enough to allow me to replace the plane with another of the same type at the market price... but not so much that the insurance company won't total the plane if it's sustained major damage that will seriously affect resale after the repair.

I've tended to insure my Mooney's on the high end as they've both been very well equipped and I knew it would take top dollar to replace them. There have been a couple of examples of people who insured their plane for just what they paid for it, and then an accident totals the plane and the resulting payout isn't really enough to replace it.

[PTK]

5 minutes ago, mooniac15u said:

Insurance hull value has very little to do with market valuation.  It's whatever you can convince them to write the policy for and are willing to pay the corresponding premium. 

I respectfully disagree. The insured stated or agreed value has everything to do with a realistic market value. There needs to be an objective baseline of what it would take to replace the aircraft. This is an accurate market value and should be reviewed and adjusted periodically if necessary.

[mooniac15u]

4 minutes ago, PTK said:

I respectfully disagree. The insured stated or agreed value has everything to do with a realistic market value. There needs to be an objective baseline of what it would take to replace the aircraft. This is an accurate market value and should be reviewed and adjusted periodically if necessary.

An insurance policy is a fixed contract that states how much compensation you will receive in the event of a total loss.  It could be far less than market value if that is what you choose to insure it for.  Or, it could be your realistic replacement value if that is what coverage you purchase.  Market valuation is subjective and constantly fluctuating.

[Browncbr1]

Thank you everyone for comments so far.  I understand the payout vs premium.. I think I want to insure for pretty close to market value, even though I probably have more money in the plane than its actual market value.  I just don't know what the actual market value would be for mine, as I haven't seen any comparable planes on the market in a long long time.  Does $80k sound like a selling price for a plane like mine?  more?  less?   I think $80k might be on the top end for an F no matter what... 

[INA201]

I'm in a 78J and am upgrading to similar avionics. It has Good paint and interior. I insured for $105k. I couldn't buy and upgrade a J to this level for $105k but could probably buy one similarly equipped in the $100-$120k range. You could probably get a very nicely equipped F for $80k. Hope this helps.

[RobertGary1]

Remember that market value is not replacement cost. Factor in travel and pre purchase. Also taxes (9% here)  

-Robert

Edited November 14, 2017 by RobertGary1

[AH-1 Cobra Pilot]

3 hours ago, Browncbr1 said:

It’s insurance renewal time and I need to update my hull value after upgrades.  Im just not really sure what my plane is actually worth now.   Also, what are everyone’s thoughts on valuation based on replacement vs market selling value?   

67’ F jbar 

Gtn650, dual G5s, edm830, ps pma8000, insight strikefinder, kx155, Brittain hdg/nav/alt AP,  A1A engine with 700smoh, top prop with 300 since new, a little hail on the ailerons and little rash here and there, paint is decent.  Very nice new custom leather interior. LED landing light, brake reversal, no windshield or cowl mods.    No corrosion, no squawks.  

Any ideas or suggestions?   I was thinking to put a hull value down around $80k??

I ran VREF.  Since you did not give a TT, I used the standard 4040TT.  It gives credit for the GTN-650, EDM 380, Strikefinder, Alt Hold, and nice interior, but, surprisingly, nothing on the G5s.  End result is:

1967 - MOONEY SUPER 21/EXEC M20 E/F
$65,400.00 (as configured)

 

I have been thinking a lot about this, too.  I bought my 201 about 2 years ago for $69,500.  VREF now shows it worth about $84,000.  Replacement value is foremost in my mind, as my dad landed his T-210 gear-up recently, and the repair bill was quoted between $80,000 and $110,000!  Unbloody believable, as the only visible damage is 3 square feet of skin and the prop.  ( He made a perfect landing.  The investigator noted 16 prop slashes on the centerline.)

[AH-1 Cobra Pilot]

1 hour ago, PTK said:

I respectfully disagree. The insured stated or agreed value has everything to do with a realistic market value. There needs to be an objective baseline of what it would take to replace the aircraft. This is an accurate market value and should be reviewed and adjusted periodically if necessary.

I have to think the insurance companies know what your plane is worth, (replacement cost), and will not insure it for much more than that.  Otherwise, it would invite fraud.

[Marauder]

1 hour ago, Browncbr1 said:

Thank you everyone for comments so far.  I understand the payout vs premium.. I think I want to insure for pretty close to market value, even though I probably have more money in the plane than its actual market value.  I just don't know what the actual market value would be for mine, as I haven't seen any comparable planes on the market in a long long time.  Does $80k sound like a selling price for a plane like mine?  more?  less?   I think $80k might be on the top end for an F no matter what... 

I would do as Cobra suggests below. Load up all of those high priced additions you made and set the hull to cover the VRef. The last thing you want to do is not insure for enough to cover what you have in the plane. I have never had an issue for insuring for the VRef.

[Browncbr1]

Just now, Ah-1 Cobra Pilot said:

I ran VREF.  Since you did not give a TT, I used the standard 4040TT.  It gives credit for the GTN-650, EDM 380, Strikefinder, Alt Hold, and nice interior, but, surprisingly, nothing on the G5s.  End result is:

1967 - MOONEY SUPER 21/EXEC M20 E/F
$65,400.00 (as configured)

 

I have been thinking a lot about this, too.  I bought my 201 about 2 years ago for $69,500.  VREF now shows it worth about $84,000.  Replacement value is foremost in my mind, as my dad landed his T-210 gear-up recently, and the repair bill was quoted between $80,000 and $110,000!  Unbloody believable, as the only visible damage is 3 square feet of skin and the prop.  ( He made a perfect landing.  The investigator noted 16 prop slashes on the centerline.)

Thank you for doing the VREF legwork.

Wow, I doubt I would ever let mine go for $65k even though it has TT closer to 6k hours.   

[PTK]

2 minutes ago, Ah-1 Cobra Pilot said:

I have to think the insurance companies know what your plane is worth, (replacement cost), and will not insure it for much more than that.  Otherwise, it would invite fraud.

They will let you know if you try to insure it for too high or too low a stated value. They require your signature if you try to insure it too low. For your protection.

[neilpilot]

Just now, Ah-1 Cobra Pilot said:

I have to think the insurance companies know what your plane is worth, (replacement cost), and will not insure it for much more than that.  Otherwise, it would invite fraud.

Does that mean that your insurance quote is based on an inventory of your avionics, aircraft TT and SMOH, paint and interior condition, etc?  I don't think that my broker has asked me for that information.

[DonMuncy]

If you insure your plane for too much, in the event of an accident, the insurance carrier may opt to repair, rather than pay out the full cost. If you insure for too little, you risk not getting enough to replace it. Plus the carrier will not insure it for a grossly exaggerated number. In my opinion, you should stick close to the real replacement value, a little on the high side.

[rbridges]

1 hour ago, Browncbr1 said:

Thank you everyone for comments so far.  I understand the payout vs premium.. I think I want to insure for pretty close to market value, even though I probably have more money in the plane than its actual market value.  I just don't know what the actual market value would be for mine, as I haven't seen any comparable planes on the market in a long long time.  Does $80k sound like a selling price for a plane like mine?  more?  less?   I think $80k might be on the top end for an F no matter what... 

I don't think that's excessive.  Your premium probably wont shift much going from 60-70-80.  You just have to decide if you'd be okay looking for a new plane if your plane was totalled, and you were given $XX.  Mine is insured at 60k, and I'm thinking about raising it.  

[ArtVandelay]

I have to think the insurance companies know what your plane is worth, (replacement cost), and will not insure it for much more than that.  Otherwise, it would invite fraud.

They don’t know what improvements and new equipment you’ve installed since last renewal. My agent said they insure the avionics at full price but don’t consider the labor involved. So when I gave then a list of new equipment, they asked for equipment costs.

[Mark89114]

I think you have to realize insurance is a gamble either way.  Sometimes you might win and sometimes you might lose but all along you are paying premiums every year.  I think a lot of it depends on your comfort level with risk.

 

As a side story I own a building inherited from my father who never believed in insurance.  I look at adding it and they want me to insure it for $16 million which is replacement value.  But realistically it is 100 years old cobbled together steel, block and old wooden structure and it only appraises at $1.5 million.  Talk about moral hazard, as soon as I start paying premiums on a $16 million building I am thinking about encouraging smoking and huge tornados.....  

 

[Seth]

50 minutes ago, DonMuncy said:

If you insure your plane for too much, in the event of an accident, the insurance carrier may opt to repair, rather than pay out the full cost. If you insure for too little, you risk not getting enough to replace it. Plus the carrier will not insure it for a grossly exaggerated number. In my opinion, you should stick close to the real replacement value, a little on the high side.

I insure mine slightly on the high end.  My Missile is insured for $140k.  

My F was for about $5k more than I sold it for.

-Seth

[gsxrpilot]

I've never put much stock in VREF. I find that my spreadsheet listing every example of the model for sale across all the usual websites, along with details such as hours, panel, UL, damage history, paint/interior, upgrades/mods, etc. is a much better estimate of the worth of a plane. After all, if I have to replace it, I can't buy one from VREF.

My M20C was purchased for $48K, sold for $50K, insured for $60K. My M20K was purchased for $119K and after full panel upgrade is insured for $160K. In both cases I had to justify the hull value with an equipment list. If something happens and I lose the plane, I'd like a check from the insurance company that will allow me to go shopping.

[Bob_Belville]

My renewal is coming up and I am asking bidders to insure my '66E for $100,000 hull. This is above their guidelines for make and model so one of the underwriters requested a spec sheet. I provided the list below and they accepted the value. I consider this a fair compromise. $100k is above "market value" but below replacement cost. If major work has been done, particularly to the panel, it is important to set the insured value high enough that in the event of a repairable event such as a gear up landing that's going to mean a claim of $30-40k or more that the adjuster doesn't calculate that his best loss is to pay you the agreed hull value, save himself the repair costs and sell the plane including the avionics which he now owns as salvage. @Amelia's belove M20K is a recent case where the adjuster did just that.

N943RW 1966 Mooney M20E serial 929
1966 M20E
Airframe TT	3,115	as of 11/3/2017
Lycoming IO360 A1A	985	SFRM
	222	Since IRAN by Triad.
Prop - Hartzell Top Prop Scimitar	222	new 2015
Upgrades:
New 3/16" solar grey windows all around w door vent window		Dec. 2015
PowerFlow Exhaust		new 2012
Fine wire plugs		new 2012
leather interior		new 2012
"201" style windshield
201 panel/glareshield		(complete new panel 2012 better than 201!)
201 style cowl
Plane Power 70A alternator/VR		new 2012
Concorde RG 35 AXV battery		new 2015
External power plug
Avionics and Instuments:
Auto pilot - STEC 50 w Alt Hld
Stormscope - WX-900		overhauled 2012
Aspen PFD 1000 - with Synthetic Vision, traffic, AOA, w GPSS		new 2012
GPS - Garmin GTN 750		new 2012
Garmin FS 510		new 2016
Garmin GDL 88  - ADS-B in & out -traffic, weather - feeds GTN and Aspen		new 2012
Garmin GPS 696 - hard wired and linked to GTN		new 2012
CYA100 AOA		new 2015
JPI EDM 930		new 2012
KX155 w GL #2 NavCom
Garmin GTX 327 Xponder		new 2012
Garmin GMA 340 Audio Panel		new 2012
Other Upgrades and STC'd Modifications:
Oil cooler relocated by Lake Aero Style STC SA2513NM
Fiberglass nose cowl by AeroResources Inc  STC SA7589SW
Mooney 201 M20J Spinner & spinner bulkhead assys from Aero Resources Inc STC SA7589SW
Speed brakes by Precise Flight Inc STC SA5708NM
Mooney Bladder Tank 6 bay system by O&N Aircraft Modifications Inc STC SA2350CE
Dorsal Fin Fairing by Lake Aero Styling, STC SA4443NM
Tail Root Fairing Horizontal by Lake Aero Styling, STC SA4443NM
Wheel well liner covers by Lake Aero Styling, STC SA4443NM
Wing Root Leading Edge Fairing by Lake Aero Styling, STC SA4443NM
Relocated Cleveland wheel brake assys by Lake Aero Styling, STC SA4443NM
Hinge cover on Aileron, Elevator, & Rudder assy by Lake Aero Styling , STC SA4443NM
Aileron lower gap seals by Lake Aero Styling, STC SA4443NM
Flap gap seals by Lake Aero Styling, STC SA4443NM
One piece fiberglass belly pan fairing with skid runners by Aero Mod Inc, STC SA4080NM
CiES fuel level sensors and add on bladders (to 64 gallons) scheduled Dec. 2017

[Bravoman]

 Also, one must factor in on the question of how much to insure for the relative risk of a loss during any given policy period. Without  accepting some  acceptable degree of risk ourselves, we can all insure  ourselves into the poorhouse. I for one accept more risk on hull coverage than liability because I view the down side exposure much greater on that side of the equation.

[Parker_Woodruff]

When I was an insurance agent, I would recommend my clients insure their aircraft so that they could replace it with one of like kind and quality.  Sometimes you can buy one that is of like kind and quality.  Sometimes you'd have to buy one then upgrade it to achieve like kind and quality.

[midlifeflyer]

1 hour ago, Parker_Woodruff said:

When I was an insurance agent, I would recommend my clients insure their aircraft so that they could replace it with one of like kind and quality.  Sometimes you can buy one that is of like kind and quality.  Sometimes you'd have to buy one then upgrade it to achieve like kind and quality.

Parker, would you mind discussing the risks of over-insuring?

[Parker_Woodruff]

Over-insuring, as I believe Don Muncy stated above, gives your insurance company a lot of range to repair an aircraft before it becomes a total loss. 

An insurance company won't pay more than what your plane's agreed value is to fix it.  And they don't want the risk of going over your plane's value to fix it.

 

Let's use an example where an M20J that could be replaced with one of like kind and quality for $70,000 is insured for $120,000.

This M20J crashes after takeoff causing substantial damage to the aircraft.

Insured for $70,000: This M20J that has $55,000 of damage and is worth $20,000 on a salvage will likely be totaled if it was insured for $70,000.

Insured for $120,000: This M20J that has $55,000 of damage and is worth $20,000 in salvage will likely get repaired.  They don't want to write a check for $120K.  Do you still want your Mooney after a $55,000 substantial repair?  Most people don't.