The Lay-Up

06/14/2023 Written by: Stuart Hope

The Lay-up: No, we aren’t talking basketball.

The lay-up credit is a little-known and little-used coverage under a corporate aircraft insurance policy. 

It doesn’t often come into play, but in certain circumstances, it can return premium to you that otherwise would have been money wasted.

The lay-up credit is coverage that is either already included in the provisions of your policy or can be added by endorsement. If your policy does not incorporate the clause, your broker must ask for it to be added/endorsed. Each insurance company has a slightly different definition; generally speaking, if your aircraft is laid up and out of service (maintenance, inspections, service or alterations, repair, etc.) AND the aircraft will not be in flight at any time during the lay-up period, the insurance company will return a percentage of the applicable premium pro-rata based on the number of days the aircraft is down.

Coverage Triggers and Requirements

The rules of the game are as follows:

  1. The aircraft has to be down for the minimum number of days stipulated in the policy (normally 30 or 45), which must be consecutive. Depending on the policy language, you must notify the insurer once you put the aircraft out of service.
  2. The insurer will then note in the file that there is no flight coverage on the aircraft beginning on that date.
  3. When you are ready to place the aircraft back on flight status, notify the insurer of the date.
  4. At the end of the policy period, the insurance company will return a pro-rata percentage of the applicable premium (more on that later) corresponding to the number of days the aircraft was out of service and not flying.  

The coverage does not apply if the aircraft is laid up because of a loss or damage covered under the policy. Certain insurance companies require you to have received prior written approval from them to put the aircraft on lay-up.

Doing the Math 

Each insurance company returns a slightly different amount. For example, one insurer only returns 50% of the Hull portion of the premium. So, if the total premium was $34,600 for full coverage, we need to know how much the hull component of the premium is in order to perform the calculations. Let’s assume the Hull premium was $14,600, and the aircraft was down 47 days. 47 days/365 days = .1288. The return premium would therefore be $14,600 x .1288 = $1880. Some insurers return a blend, giving 50% of the Liability premium and 50% of the Hull premium.

The Takeaway

The lay-up credit is a fairly standard coverage on Turbine/TurboJet business aircraft insurance policies. While not coverage that is used often, it can and should be reviewed by your broker for your particular risk and category aircraft. The percentage that is returned and the number of days the aircraft must be out of service for the lay-up to trigger can be successfully negotiated depending on the size aircraft and account.  

If your aircraft has recently been down for an extended period and you think your lay-up clause may have applied or you would like to discuss further, call your AssuredParters Aerospace broker.

Two red and white planes in a dimly lit hangar
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