1: AVOID UNDERINSURANCE
Are you more focused on a ‘good deal’
when insuring your aircraft than on getting it
insured correctly? Or are you too busy with
everyday life to understand exactly what you
are paying for? The old saying goes, “Penny
wise, pound foolish.”
Don’t we tend to realise this too late?
For example, after being caught in a
crosswind and experiencing a prop strike,
your gut tightens as you remember that
you cut a bit on the ‘Agreed Value’ of
your beloved aircraft when renewing your
insurance policy, to save a buck or two forthat Christmas trip to the Okavango Delta.
At claim stage, it’s a hard bullet to bite- underinsurance is not a matter you’d like
to think about when calling your broker. So
how do you really know what you should
insure your aircraft for? A good start is to
decide how much you will sell it for, and
whether you can afford to replace it if it is
deemed uneconomical to repair.
To illustrate, let us say your aircraft
had a prop strike and the damage adds up
to R480,000. You insured the aircraft for
R500,000. However, its market value is
R1,000,000. The insurer, within its rights,
can either decide to pay a claim amount
of R480,000 (less the applicable excess)
or an amount of R500,000 and then take
ownership of the aircraft. The average
condition does not apply to aviation policies,
but underinsurance may result in an aircraft
that is repairable being written-off. Over
insurance is also not ideal, as the premium
is calculated on the agreed value. This
means that you end up paying more than
the aircraft is actually worth.
2. REMEMBER THAT ‘BETTERMENT’
APPLIES
Another element that is often
misunderstood is betterment. Betterment is
the money you will have to pay to replace a
unit or part based on how long you’ve used
it, as your insurer will only pay to replace the
value still left in it. You need to keep in mind
that betterment will be applied to any unit or
component of your aircraft that has an hour,
cycle or calendar life assigned to it.
To demonstrate, let’s look at the
following example: You have damaged the
main rotor on your helicopter. The lifetime
of the rotor is 6,000 hours, and you have
already flown 3,000 hours. The cost for
new rotors is R150,000. Betterment will be
calculated as follows: (3 000 hours/6 000
hours) x R150,000. Therefore you will be
obliged to pay an amount of R75,000 (the
value you have already used up) and the
insurer will pay an amount of R75,000 (the
value that remains, that you can no longer
access due to the damage). Do not make
the mistake of only concentrating on the
Insurance
GETTING INSURANCE
Right:
Four easy steps to
make sure your
aircraft is properly
insured
If you overshoot a runway because, according to the POH,
it was too short, insurance is unlikely to pay out.