Accidents happen. That is why you purchase an aircraft insurance policy to cover your aircraft. We hope you will never have to use the policy, but if you experience a situation that leads to damage to your aircraft or bodily injury to others, it will help to understand how the claims process works in the aviation world.
What are the typical steps involved in the claims process?
Unfortunately, all aircraft claims start with a mishap that leads to either bodily injury or property damage, but we recommend following the steps below.
1. Ensure medical injuries are addressed. It may sound obvious, but this includes injuries to you, your passengers, or people outside the aircraft.
2. Contact your insurance broker or the aviation insurance company directly to report the loss and coordinate next steps. Take several pictures of the damaged aircraft and/or the scene of the loss. The more you can document the damage the better.
3. Protect the aircraft from further damage. The insurance policy places responsibility on the insured to protect the aircraft from additional damage. This may include the need to hire a security company to watch over the damaged aircraft to prevent theft of avionics or parts.
4. Cooperate with government agencies (FAA, NTSB, police)
5. Gather pilot and aircraft documentation. Obtain copies of your pilot’s license, medical, and pilot logbook. In addition, gather aircraft logbooks in order to confirm the airworthiness of the aircraft. The insurance company claims adjuster will be asking for copies of pilot and aircraft information. They will also ask for an ‘occurrence’ or ‘incident’ report to verify details surrounding the claim.
6. Obtain estimates to repair the aircraft damage. The insurance company will need to determine whether the aircraft is economically repairable, which means at least one, and in some cases multiple, estimates for repair will need to be obtained. The insurance company will not tell you where to have the aircraft repaired. The adjuster will be happy to make a recommendation for a repair facility, but it is your decision where the aircraft is repaired.
7. If your aircraft is economically repairable, you will need to authorize the repairs with the repair facility of your choice. When the final cost to repair is established, the insurance company will determine the amount you will be paid. The final payment amount may be less the following items:
b. Any repairs you authorize above and beyond the claim
c. Any ‘betterment.’ See below for more on the concept of ‘betterment’
Typically, the final document that needs to be provided to the company before they can cut a check is a ‘Proof of Loss.’ The Proof of Loss document essentially spells out the details of the payment being made and the basic details of the loss that has led to the payment.
8. If the aircraft is determined to be a total loss, typically the carrier will arrange payment for the insured value less the deductible. Lienholders or any other entity with financial interest in the policy, such as a premium finance company, will be included on the payment. In the case of a total loss, the carrier is entitled to the aircraft ‘salvage.’ You will be called upon to provide aircraft logbooks, a completed bill of sale, and the ‘Proof of Loss’ document noted above.
Answers to Common Claims Questions
What is Betterment?
A basic insurance principle is “indemnification,” which is restoring the insured back to where they were at the time of the loss. No better, no worse. Because of this the concept of “betterment” can come up during the claims process, especially with life limited parts found on aircraft and helicopters.
An example of betterment:
- You experience a prop strike with a 2,000-hour TBO prop that has 1800 hours on it. You or the adjuster are unable to find a replacement prop other than a brand new prop. The adjuster will be discussing a charge for betterment, because you will owe the difference between a zero hour prop and the one you had, which was 1,800 hours. So, you could potentially owe for the value of the 1,800 hours on the prop, which is typically calculated using the cost of a standard prop overhaul.
How does the carrier determine when my aircraft becomes a “total loss?”
Generally speaking, the aviation insurance carriers will use the following equation to determine if an aircraft is a constructive total loss:
If the sum of the cost to repair the aircraft and the salvage value equals or exceeds the insured amount, the aircraft will be deemed a constructive total loss.
Did I just have an “accident” or “incident?”
It is important to note that it is not the insurance company’s responsibility to determine whether or not you had an “accident” or “incident” as defined by the FAA. It is also not the insurance company’s responsibility to report an “accident” or “incident” on your behalf. The definition of “accident” or “incident” can be found in FAR Part 830. Depending on the circumstances of the claim, you might want to research completing a NASA Aviation Safety Reporting System (ASRS) form in order to take advantage of possible immunity from the FAA.
Will I have coverage for mechanical breakdown or wear and tear items?
Aviation insurance policies are not warranty policies. In other words, the policies specifically exclude coverage for mechanical breakdown and wear and tear items. As an example, let’s say you had a prop strike and the engine manufacturer mandates an engine tear down. If the engine tear down finds damage inside the engine that was NOT a result of the prop strike, you will be responsible for the cost of the ‘wear and tear’ inside the engine. Likewise, if the failure of a part, such as your nose gear linkage, leads to an accident, the nose gear linkage will not be covered as part of the claim.
We recommend a spirit of cooperation with your insurance company. The policy actually spells out the obligation for you to cooperate, but all too often we see claims go sour because the insured starts with the wrong attitude toward the insurance company and/or adjuster. The claims adjuster’s goal is to provide fair handling and settlement of claims, in accordance with the terms and conditions of the insurance policy.
At the end of the day, your aircraft insurance broker is your claims advocate. If you are having problems with an adjuster or need help with anything relating to the claim or claims process, reach out to your broker for help. As aviation insurance professionals, AssuredPartners Aerospace is ready, willing, and able to help with your aircraft insurance claim.