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Insurance, Business and Financial

After the tornado is too late
Author Last Post
Although it has been 20+ years ago, I have personal experience regarding the consequences of having hull coverage that is $20k shy of purchase price including improvements. If need be, I can produce a copy of the settlement check and the schedules provided to me by the insurance company as well as the schedules attached to my tax return in support of the deduction for the uninsured casualty loss. If it happens, you aren't going to like it. If I had it to do over again, the choice regarding raising the coverage is a no-brainer. Our claim calculation was simple, since the airplane was catastrophically destroyed. YMMV

You can safely assume that the insurance company will do whatever they deem in their best interest, in conformance with the terms of the policy they issued, when faced with a claim. They are not obligated to do what you might think is in your best interest, or consult with you regarding your preferences.

I spend a lot of time in a shop that has good sheet-metal capability and does a lot of insurance work. They are continually perplexed at some of the the fix vs. total decisions made by the insurance companies, and don't try to predict which will occur. One of the experienced technicians said he has concluded that repair costs somewhere around 60% of total insured value seems to be the tipping point.

The term "total" doesn't mean the airplane is unrepairable; it just means the insurance company has chosen to pay the total amount of the policy, since they think their net outlay will be less than if they paid to repair it. Their term is that the airplane is not "economically repairable."

Some insurance companies will (or would) give you check for the total amount of the policy, or at your option they will give you the wreck and a check for the difference based on their calculations. It can be a perplexing decision.

From a personal standpoint, my problem with repairs or other long-term projects (same airplane, different wreck) was that the down-time required didn't stop the meter on the other fixed expenses. I was still required to pay debt service (or opportunity cost on the capital invested) hangar, insurance (usually at a reduced premium) and other expenses during the 11-month period that the aircraft was being repaired. That's hard to gag down, and a long time to be without an airplane.

As clarification, please note that both of the crashes referenced herein were not of my doing (knock on wood).
 
I went to aopa'a vref page & found out that the extra money you put into your bird doesn't automatically increase the value by that amount.For example if you put a garmin 530 in & expect it to increase the value by the 15,000 to 20,000 that you paid then you would be wrong.If you overinsure you bird you could not only be paying to much for your insurance;but you also stand the chance of having that bird rebuilt when it should have been written off.Just a word of caution.

Daryl
 
Following up on Wayne's post: I was surprised at the number of pilots on the BKD airport who had only insured aircraft for the amount of the origional financing without considering their seed money or replacement value. also, many of the hangers and contents were not insured, the logic being "they won't burn." Many of us store things in hangers without thinking of the possibility of the building blowing away. I saw several classic cars trashed from this event, including a cherry "67 Vette with liability only.
With the increases in steel and construction costs, there are a lot of unpleasant surprises for these folks.
 
Wayne,

Excellent advice and well timed. My policy renews next month. I'll be reading it much more closely this time to make sure I don't miss any gotchas.

Sad day when airplanes are smashed up by Mother Nature.

Clearly she isn't an aviator.

Brian Denk
 
I recently spent much of a day walking through what little is left standing (intact) at the Breckenridge, TX, airport after last week's tornado. The havoc to airplanes, hangars, classic cars, boats and other stuff that was damaged or totaled was depressing, as was the damage to the Addison and Kittyhawk airports in the Dallas area.

After hearing some of the tales of woe, I was again reminded of the need to maintain hull insurance coverage at the fair market value of the airplane, including improvements and upgrades installed.

Say for example that you install $25k worth of Garmins, STec's, P-Ponks, Paint, Interior or whatever in your $100k Skywagon (that you have insured for $100k) but you don't adjust your hull coverage for the increased value. If the tornado rolls it into a ball, like the pristine 185 that was smushed in BKD (that you may have seen on the nightly news) the insurance company can declare it a total loss, write you a check for the amount of the insured value ($100k) and sell what's left of your airplane to the highest bidder.

If they recover $40k (from sale of engine, prop, avionics other salable items) their net loss on the claim is $60k, and your loss is $25k. If you have been prudent and bumped the hull value to $125k, they have to write you a check for that amount less any deductible. The piddling amount of increased hull premium you may pay will look pretty small when you're standing on the ramp looking at the remains of what used to be a fine airplane.

Two Skywagons, both securely parked in their hangars were damaged, one probably a total.
 
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