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12.6 Aviation Insurances

Aviation insurance is a specialized form of coverage offered by insurers that underwrite aircraft-related risks. It may provide physical damage coverage for the aircraft itself, since aircraft exposures are generally excluded under standard commercial insurance policies. Property or merchandise transported by air is not covered under the aircraft policy and requires separate Air Cargo insurance.

Aviation insurance provides two primary coverages: Aircraft Hull insurance and Aircraft Liability insurance. These coverages may be purchased separately or combined in a single policy.

Hull Insurance​

Aircraft Hull insurance covers physical loss or damage to the aircraft, including its frame, engines, controls, and navigation and communication equipment. Coverage is available at three levels, which may be selected individually or combined:

  • Ground Coverage (Not in Motion Coverage) protects the aircraft while it is on the ground and not moving. Covered perils commonly include fire, theft, and vandalism.
  • Ground Including Taxi Coverage (Not in Flight Coverage) includes coverage while the aircraft is stationary on the ground and while it is taxiing. For example, damage caused by a collision with another aircraft while taxiing on a runway may be covered.
  • Ground and Flight Coverage (All-Risk Coverage) provides the broadest protection. It covers the aircraft on an open perils basis while it is stationary on the ground, taxiing, or in flight.

The premium for Aircraft Hull insurance increases as the scope of coverage and number of insured perils increase. Therefore, Ground and Flight Coverage generally costs more than the more limited ground-only options. Hull losses are also typically subject to either a flat-dollar deductible or a percentage deductible.

Typical exclusions under Aircraft Hull insurance include:

  • Wear and tear
  • Electrical or mechanical breakdown
  • War
  • Acts of terrorism
  • Damage caused by excessive heat
  • Hijacking
  • Seizure or confiscation by a governmental authority

Liability Insurance​

Aircraft Liability insurance covers the insured’s legal responsibility for bodily injury or property damage arising from the ownership, maintenance, or use of an aircraft. Like Aircraft Hull insurance, liability coverage is divided into three categories, and the insured may purchase any combination of them:

  • Bodily injury or death sustained by third parties other than passengers, such as individuals on the ground
  • Bodily injury or death sustained by passengers
  • Damage to property owned by third parties

When all three Aircraft Liability coverages are selected, the policy generally provides a combined single limit that applies to each occurrence. The policy may also include a required or optional sublimit. A per passenger sublimit restricts the amount payable for injuries to each passenger, while a per person sublimit applies to each injured person, including both passengers and other third parties.

Medical Payments coverage may also be included to pay reasonable medical expenses incurred by passengers within 1 year after an aircraft accident. This coverage applies regardless of who was at fault.

Typical exclusions under Aircraft Liability insurance include:

  • Bodily injury or property damage that is expected or intended by the insured
  • Bodily injury to employees covered by Workers’ Compensation insurance
  • Liability assumed under a contract
  • Bodily injury or property damage resulting from the application of fertilizers or similar substances
  • Bodily injury or property damage caused by pollution or aircraft noise