Properly Value Your Aircraft

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Most aviation policies are split into hull (protection against physical loss or damage to the aircraft), and liability (loss to the property of others or for bodily injury of others arising out of your negligence).

Agreed Hull Value: Properly value your aircraft on your policy. The value that you place on your aircraft and agree to with underwriter is the basis that will be used when settling your claim. This is referred to as an “agreed value policy”. If you under-value your aircraft, your claim settlement may be inadequate.

Under-valuation: If you under-value your aircraft, you can actually cause a partial loss to become a “constructive total loss”. If the salvage value plus the cost to repair exceed the insured value of the aircraft, the adjuster could pay a total loss and take title to all the salvage including the avionics.

For example: You own a $100,000 aircraft but insure it for only $50,000. You have a $25,000 claim. The adjuster receives a bid to repair the aircraft for $25,000 and a salvage estimate for $65,000. He would be foolish to spend $25,000 to repair your aircraft when he could pay you $50,000 for your total loss and sell the salvage for $65,000.

Even though this may be an exaggerated example, we frequently see aircraft owners try to save money on their hull insurance by under-insuring the aircraft. In an attempt to avoid this problem, the underwriters often monitor proper valuation. Although they are not qualified to appraise aircraft values, they are aware of market trends. Reviewing your stated insured value periodically is important, especially considering that some older models are actually increasing in value. Don’t forget you can change the value of your aircraft hull any time during the policy period. You don’t have to wait for renewal.

We are seeing used aircraft values increase steadily. In a year’s time, you might realise a significant appreciation. Upgrades to your aircraft such as new paint, new engine, new interior, or new avionics can greatly alter the value of your aircraft.

In any event, if you think the value of your aircraft has changed significantly, don’t wait, give us a call and we will ask the underwriter to endorse the policy.