Menu Sign In Contact FAQ
Banner
Welcome to our forums

Insurance and under-insurance, in today's crazy inflated price market

A lot of people will be under-insured, sometimes by a factor of 2. In the UK, and prob99 elsewhere, the payout then gets reduced by 2x according to the principle that the insurer was on risk for 2x more than the premium you were paying. Not many people know this.

So if you insured your PA28 for 50k, the insurer says it was worth 100k, he will pay out 25k.

Administrator
Shoreham EGKA, United Kingdom

Not sure that is the same in all jurisdictions, but for my insurance:
When you have a damage < total loss, the effect is as you describe.

In case of total loss, the value you insured for will be paid out. You are still worse off as you cannot replace the plane for the insured value.

In your case, a now (inflated) 100k plane, insured for 50k and totalled, will see you receive precisely the 50k insured value minus the remaining value of the wreck (which the insurance have to help you with or accept a lower value as realized) and minus excess amount agreed.

So, the particular pain is when you have repairable damage and the insurance only pays part of it…

Last Edited by ch.ess at 22 Apr 11:51
...
EDM_, Germany

Peter wrote:

So if you insured your PA28 for 50k, the insurer says it was worth 100k, he will pay out 25k.

(Insurance law is very national, so I’m only referring to the German law):

In your case (value 100k, insurance sum 50k) they will pay half the actual damage (at current value). If the plane is totaled, the damage is 100k (the total worth of the plane) and they will pay half of it which is 50k (not by chance the insurance value). If you have a 50k repair bill, they will pay 25k. (“If x% of your plane is damaged, you get x% of the insured value”)

The formula for payout is:

Payout= actual damage * (insured value / actual value)

As the actual damage can never be higher than the actual value, you obviously never get more than the insured value.

Germany

Right; I found it here. It is called the Average formula.

One could argue the intention is to punish those under-insuring But… if you get it wrong and over-insure, the insurance company simply pockets the extra

Anyway, like I said, I reckon most of GA is under-insured now.

Administrator
Shoreham EGKA, United Kingdom

Peter wrote:

One could argue the intention is to punish those under-insuring

No, it is not. It actually does make sense. It is much more likely to have a 50k damage on a 3 Mio. airplane than on a 100k one. The formula exactly reflects that fact.

Germany

Payout= actual damage * (insured value / actual value)

Important to mention that the term in brackets is limited to 1… ;-) even in Germany

And yes, the idea is to catch those that underinsure with an expectation of not having total koss, but partial damage moreoften* – explained by a rep of a large insurer. It screws up their risk calculations.

(*maybe not particularly in aviation).

Last Edited by ch.ess at 22 Apr 13:18
...
EDM_, Germany

Where do I get an actual information about the value of my plane? You made me think. Because obviously when I bought my plane I could have argued that it had more or less the value that I paid, because it was sold on the market for that money.

Anyway, as far as I understand the payout in case of a total loss I would get the insured value in Germany (not the actual value if it is higher, but still the insured value). Right?

Germany

@UdoR I would start with Vref, although it is using USA comparables.

Oxford (EGTK), United Kingdom

Thanks for this thread, it just prompted me to check!

I’ve just increased the insured value of my RV8 from 100k to 140k due to seemingly soaring values in this market. An RV7 with less spec just went up for 150k, and there was lots of interest.

What the RV10 is insured for is another tricky one, as they don’t tend to change hands, so how do you value?

EGKL, United Kingdom

Pretty interesting.. how can we determine if my rallye is undervalued or overvalued? I bought it for 11 000 but we made a top overhaul afterwards. The insured value is 15 000. Over or under? I can see rallyes for sale asking 20-30 000 e but in Finland the prices go between 10-20 000, so if I pay for 25 000 hull, how much would the insurance company actually pay for a total loss or partial fixing? Does anyone have real experience about from where they take the value?

EFFO EFHV, Finland
28 Posts
Sign in to add your message

Back to Top