Revealed! 3 Secrets of Private Aviation Insurance

When it comes to the world of private aviation, the allure of owning a jet seems almost irresistible. The glamour, convenience, and prestige associated with flying on your terms are unparalleled. However, there's an aspect of this luxury realm that often remains shrouded in mystery: aviation insurance.

In this eye-opening interview, we delve into three secrets that insurance companies don't want you to know about private aviation insurance, bringing to light some intriguing insights that might change the way you view this crucial aspect of jet ownership.

1. The Mystery of Necessity: Do You Really Need Insurance for Your Private Jet?

As Tom Lelyo points out, the first secret revolves around a question that frequently lingers in the minds of potential jet owners: Is aviation insurance a necessity?

Unlike the mandatory auto insurance we're familiar with, private aviation insurance isn't a legal requirement. The video explains that there's no law or regulation mandating the purchase of aircraft insurance. This revelation might leave some wondering whether aircraft owners can opt to forgo insurance altogether, especially if they are risk-tolerant individuals.

However, expert insurance broker Shannon Hope goes on to clarify that while insurance might not be legally obligatory, certain situations can make it a practical choice. Aircraft owners with bank loans on their jets are typically required to carry insurance to protect the asset. Additionally, if you lease hangar space from an airport or an FBO, insurance might be a prerequisite. So, while you might not be legally bound to insure your jet, certain circumstances make it a prudent consideration.

2. The Aviation Industry's Achilles Heel: Mechanical Failures and Ageing Aircraft

The second secret uncovers an aspect that insurance carriers fear: mechanical failures and ageing aircraft. The video explains that mechanical failures, especially in older planes, can be a significant concern for aviation insurance underwriters. As Tom discusses with Shannon, it becomes evident that these insurers are wary of potential losses caused by the age of the aircraft.

But the surprising revelation is that the impact isn't limited to the specific aircraft affected. You'll discover how losses in one segment of aviation – such as the well-known Boeing 737 Max 8 incidents – can have a ripple effect across the entire industry, meaning that events impacting commercial airlines can trickle down to affect even owners of the smallest of aircraft. This interconnectedness showcases how aviation insurance is intertwined, and events on one scale can reverberate across the spectrum.

3. The Broker Conundrum: Limited Options and Unseen Tactics

The final secret exposes the limited scope of options when it comes to choosing aviation insurance carriers and the role of insurance brokers. The video highlights that unlike other forms of insurance, aviation insurance is predominantly facilitated through brokers who act as intermediaries between aircraft owners and insurance companies. Here, the video provides a surprising statistic – there are only around 18 aviation insurance companies in the market.

To make things more intriguing, you'll learn about a little-known tactic used by aviation insurance brokers: 'the broker of record' letter. This letter, when signed by an aircraft owner, essentially transfers the brokerage to a new broker, terminating the relationship with the previous one. You'll discover how some brokers may use this as a tactic to win clients, implying they can secure better deals by using this letter. The tactic introduces an element of complexity and strategy into the process of selecting a broker.

Final Thoughts: Navigating the Skies of Aviation Insurance

Viewers are left with a few critical takeaways.

• Firstly, the decision to insure a private jet might not be as straightforward as one might assume, with the need for insurance contingent on various factors such as financing and leasing agreements.
• Secondly, the aviation industry's intricacies mean that events that impact one part of the sector can have far-reaching consequences for aircraft owners across the board.
• Lastly, the process of securing aviation insurance is heavily broker-driven, with limited options and unexpected tactics at play.

In the world of private aviation, insurance is a facet that demands careful consideration. This video serves as a guide, peeling back the layers of secrecy to offer viewers a clearer understanding of what insurance companies might not openly share. As with any significant investment, knowledge is power, and arming yourself with these three aviation insurance secrets could make all the difference when navigating the skies of private jet ownership.