Self Insuring an Airplane - Investment vehicles etc.

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Narwhal

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I'm wondering if anyone has legitimately tried to self-insure their airplane?

Commercial insurers wanted $12k/year to insure my cub for hull+liability coverage and I felt that was excessive, so I didn't buy it. Yes, I shopped around at every conceivable insurer. It's a factory built 2022 experimental Carbon cub with a hull value of ~$350k. I've flown it for 150 safe hours thus far. I did purchase a liability only policy on it which was priced at $2k per year. I'm a 40 y/o ATP/CFI, no accidents, etc but it's an experimental taildragger in Alaska with a relatively high hull value and I only have about 200 hours tailwheel time and 150 hrs in type. I don't see myself being too interested in a hull policy unless I can get one for about $6k/year.

I currently have enough money saved up in long-term, but liquid, investments that are sufficient to replace the airplane should it be lost. Unfortunately it would pretty much wipe out my liquid savings aside from my IRA/401k accounts which I wouldn't want to touch.

So, I'm thinking of investing an amount roughly equivalent to the 10k/year commercial hull insurance premium (12k - 2k liability) ever year in US Treasury I-Bonds. This is a fairly low-risk investment that pays a variable interest rate based roughly on inflation that matures after 12 months. I would then allocate these funds for the sole use on airplane related losses.

Do you think this is a good idea, or is it all just mental masturbation?
 
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My Cub’s value is similar to yours and I just dropped Hull and went liability only for $700.00 per year.
 
Narwhal said:
…Do you think this is a good idea, or is it all just mental masturbation?
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Latter more than former; you plan isn’t self-insuring, it’s just saving up to replace it later.
 
TCABM said:
Latter more than former; you plan isn’t self-insuring, it’s just saving up to replace it later.
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What would a legitimate self-insurance scheme for "hull" be made up of then? I figured an existing pool of money to cover immediate replacement plus an annual payment to cover increasing repair/replacement costs over time would do it?
 
That certainly seems high, but it's only 3.4% of the hull value. It will sure seem cheap if you substantially damage or total your aircraft. If I was in your position I would insure it...
 
I don't think the term self-insurance applies here. Usually self-insurance comes into play where insurance coverage is mandatory, so you have to show that you have the sufficient funds to cover the mandatory loss limits in lieu of insurance . I think what you are asking is how much gambling is warranted. I think the only way to legitimately cover your hull in the event of a loss is to not own a plane until you have banked & invested the imaginary insurance premiums. Once the unspent premiums have built up to the hull value, then buy the plane. Otherwise it is playing the odds. You just have to decide how much of a gambler you are. For me, if I can afford to lose it, or I don't have to replace it, then I only insure liability. If I absolutely must replace it in the event of a loss, I insure the item.
 
Get an older airplane so the value isn’t so significant?

If your savings equals your airplane value then in an incident it would not be wise to use all of your savings to buy a new one. Maybe that means it is time to exit aviation upon a crash?

3%+ insurance premiums is robbery in my opinion. That means you are planning on a total loss every 25-33 years to break even.

My premium is under 2%. I think 1% is fair, but competitive should be closer to 0.5%. My opinion.

Sounds like we need a crypto insurance for Aviation. Remove the fat salaries and profits from the equation.
 
Narwhal said:
What would a legitimate self-insurance scheme for "hull" be made up of then? I figured an existing pool of money to cover immediate replacement plus an annual payment to cover increasing repair/replacement costs over time would do it?
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If the airplane is destroyed in what would be considered a covered loss, an insurer would cut you a check today for the agreed to (hull) value.

In your plan, you’re facing years before accruing enough gains to replace the hull.

ETA: if you had a cash account with full replacement value in it today, you could consider yourself insured for a hull loss minus any liability.
 
I haven't looked at this as closely for the plane but I've thought about it for cars- I have a small fleet.

The bulk of the premium is for liability- which is way more risk than I'm willing to accept. I could accept the risk of a total "hull loss" on any of the cars but the extra cost of collision/comprehensive coverage is so low that I'm not really saving much anyway.

I doubt aircraft premiums are much different.
 
Self insured 60% of the time

Insurance is a product not a virtue

They’ll even sell it for your $15 pizza


 
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a club I used to belong to and still instruct for did that for about 20 years or so. Purchased liability for the 7 planes and about 90 members and put the money saved over buying Hull insurance into a saving/investment account. After 20 years and few various losses I believe they essentially broke even. They no longer self insure.

A couple thoughts for the OP.
At 10K per year I would guess it will take something like 25-30 years to save enough money to pay for a total loss. I didn’t run actual #’s but that could be done accounting for interest, depreciation and inflation.
Of course until that time a total loss would be a much larger hit on your financial situation. But on the other hand no losses could be a large windfall for you, Welcome to the world of Risk vs Reward.

While the odds are probably most likely of you damaging the aircraft should a loss occur, and you have the most control over whether or not that happens, There are other events that you don’t have control over… Fire, Theft, Flooding, Animal collision. Uninsured aircraft/vehicular collisions, Hanger failures (uninsured).. etc.

Brian
 
brcase said:
a club I used to belong to and still instruct for did that for about 20 years or so. Purchased liability for the 7 planes and about 90 members and put the money saved over buying Hull insurance into a saving/investment account. After 20 years and few various losses I believe they essentially broke even. They no longer self insure.

A couple thoughts for the OP.
At 10K per year I would guess it will take something like 25-30 years to save enough money to pay for a total loss. I didn’t run actual #’s but that could be done accounting for interest, depreciation and inflation.
Of course until that time a total loss would be a much larger hit on your financial situation. But on the other hand no losses could be a large windfall for you, Welcome to the world of Risk vs Reward.

While the odds are probably most likely of you damaging the aircraft should a loss occur, and you have the most control over whether or not that happens, There are other events that you don’t have control over… Fire, Theft, Flooding, Animal collision. Uninsured aircraft/vehicular collisions, Hanger failures (uninsured).. etc.

Brian
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Between health, car, life, pet, pizza, home disability, etc insurance I wouldn’t have money to fly, probably wouldn’t even have money to order my pizza let alone pay for my pizza insurance
 
brcase said:
a club I used to belong to and still instruct for did that for about 20 years or so. Purchased liability for the 7 planes and about 90 members and put the money saved over buying Hull insurance into a saving/investment account. After 20 years and few various losses I believe they essentially broke even. They no longer self insure.

A couple thoughts for the OP.
At 10K per year I would guess it will take something like 25-30 years to save enough money to pay for a total loss. I didn’t run actual #’s but that could be done accounting for interest, depreciation and inflation.
Of course until that time a total loss would be a much larger hit on your financial situation. But on the other hand no losses could be a large windfall for you, Welcome to the world of Risk vs Reward.

While the odds are probably most likely of you damaging the aircraft should a loss occur, and you have the most control over whether or not that happens, There are other events that you don’t have control over… Fire, Theft, Flooding, Animal collision. Uninsured aircraft/vehicular collisions, Hanger failures (uninsured).. etc.

Brian
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$10,000.00 per year times 25-30 years, not counting compounding interest, that must be one very very nice club plane
 
brcase said:
While the odds are probably most likely of you damaging the aircraft should a loss occur, and you have the most control over whether or not that happens, There are other events that you don’t have control over… Fire, Theft, Flooding, Animal collision. Uninsured aircraft/vehicular collisions, Hanger failures (uninsured).. etc.
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The "not in motion" hazards are scarier to me from an insurance perspective than the "in flight" ones, and harder to swallow because they're not likely to be your mistake. I believe "not in motion" coverage is available, but I'm not sure if they'll write it for a flying airplane.
 
What about liability? You may be able to replace the plane but what about the house you land on, the other planes that get damaged if your tie downs came loose, even just the environmental cleanup should you have an off airport landing somewhere like a golf course or school yard and end up leaking some gas. I would at least consider buying a liability policy especially since it sounds like you have some assets to protect
 
kmacht said:
What about liability? You may be able to replace the plane but what about the house you land on, the other planes that get damaged if your tie downs came loose, even just the environmental cleanup should you have an off airport landing somewhere like a golf course or school yard and end up leaking some gas. I would at least consider buying a liability policy especially since it sounds like you have some assets to protect
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From his math it sounds like he’s keeping the liability only policy that he currently has. The $10k goes towards the hull replacement fund.
 
Which insurance companies are you all able to use that offer liability only? I had asked about that and was told the ones which my broker are using will not write liability only and that purchasing the hull coverage is required for them to be interested enough to offer a quote to me.

I am also wondering if anybody has personal umbrella insurance that covers aviation activities as a pilot/owner not for commercial activities?
And does anybody have aviation insurance that offers greater then $1M liability coverage?
 
Mongoose Aviator said:
I am also wondering if anybody has personal umbrella insurance that covers aviation activities as a pilot/owner not for commercial activities?
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I’ve not gone looking for an umbrella policy that covers aviation activities, but those few umbrella policies I’ve seen all excluded aviation.
 
Mongoose Aviator said:
Which insurance companies are you all able to use that offer liability only? I had asked about that and was told the ones which my broker are using will not write liability only and that purchasing the hull coverage is required for them to be interested enough to offer a quote to me.

I am also wondering if anybody has personal umbrella insurance that covers aviation activities as a pilot/owner not for commercial activities?
And does anybody have aviation insurance that offers greater then $1M liability coverage?
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Avemco flipped mine from hull to liability, no problem.

My umbrella is with State Farm and excludes aviation.
 
mandm said:
3%+ insurance premiums is robbery in my opinion. That means you are planning on a total loss every 25-33 years to break even.

My premium is under 2%. I think 1% is fair, but competitive should be closer to 0.5%. My opinion.
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An experimental Cub in Alaska is in a very high risk bucket. The STOL community is very high risk in the first place, then when you add Alaska and a high hull value, you're gonna pay a bunch in premiums.
 
Being uninsured is not self insurance. It’s being uninsured. Self insurance requires registering and meeting government regulatory specifications, including having a very large amount of liquid money available. It makes no sense for a private fleet of 1 or even 10 aircraft.

Being willing to risk a complete loss to save on premiums, is NOT insurance. Words mean things. You would be uninsured. You would not get any relief in the case of a loss. You simply are willing to take the risk of a possible loss.
 
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I don't think I would do this with an airplane, especially if it's nice or cost any substantial chunk of change, but I "self-insured" my cars before I got married. I carried liability only, and then just saved what the insurance premium would have been every month if I'd gone full-coverage. I'd saved enough to rebuy the car by the time the year was up, and when I hit the deer and totaled my car, I was able to just draw from that money I'd earmarked as specifically car money. I came out ahead, because I'd saved a lot more than the check they would have cut me for the car I had, but that's a calculus you have to do yourself.

I don't think self-insuring really works very well unless you can save to replace the entire thing within a year or two. I also think carrying liability-only is a good idea, if only so that you're not worrying about some karen suing for emotional damages when your engine goes out and you have to put it down on a highway somewhere.
 
kyleb said:
An experimental Cub in Alaska is in a very high risk bucket. The STOL community is very high risk in the first place, then when you add Alaska and a high hull value, you're gonna pay a bunch in premiums.
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My Cessna 180 and experimental Cub hull rates have been almost identical based on equal declared value. There is no premium for experimental or STOL. As a long time Alaskan aircraft owner I’d say the majority if aircraft claims are paid for damage in parking. We lose more planes annually to wind storms than flight accidents. If you want to see the highest insurance rates? Put an Alaskan plane on floats.

To the decision for hull vs liability insurance? I can’t imagine not having liability, but hull doesn’t make sense for my Cub. The max value Avemco will use for my exp Cub is $200K. My Cub’s value is considerably higher than that. If I file a claim of >$125K there’s a good chance the airplane gets totaled, the damage aircraft surrendered to the insurer, and I get a check for $200K, which would be a significant loss of equity. With damages of $125K I can likely repair it for half that or less. That’s the number that matters to me. I can afford to fix it. Hull insurance for that plane makes no sense. My 180 is a different situation. It’s insured at Vref value. I can’t repair it like I can an exp Cub. I’ve chosen to maintain hull coverage on that plane.
 
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Jim K said:
The "not in motion" hazards are scarier to me from an insurance perspective than the "in flight" ones, and harder to swallow because they're not likely to be your mistake. I believe "not in motion" coverage is available, but I'm not sure if they'll write it for a flying airplane.
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I have hull coverage options for in flight, not in flight, and not in motion. Not in flight covers everything except from power-up for takeoff to slowed to taxi speed to leave the runway. I considered that but the rate wasn’t different enough from in flight coverage to justify it. A neighbor had a hangar fire a couple of days ago that destroyed two airplanes. No coverage for that loss. After hearing that story I may toggle my Cub back up to not in motion from liability only. Not in motion covers it in my hangar or tied down anywhere I choose to park it.
 
High insurance rates in Alaska for a super cub. What could the insurer possibly be thinking?
 
I've considered dropping hull coverage (~100k) on my Debonair. My premiums with hull/liability currently are around $1400/yr. I can't remember the exact figure for liability only, but it was around $500-600/yr. To this point, I've never had the cajones to do it for a savings of $800/yr. Someone once told me that if you have liability only would that possibly affect your decision making if the **** hits the fan? Right now, if I had a problem in flight, I couldn't care less about the plane (insurance company owns it at that point), only thing that matter is the safety of those on board. I think we've all heard stories of people making sub-optimal decisions trying to save an airplane.
 
dudemize said:
Someone once told me that if you have liability only would that possibly affect your decision making if the **** hits the fan? Right now, if I had a problem in flight, I couldn't care less about the plane (insurance company owns it at that point), only thing that matter is the safety of those on board. I think we've all heard stories of people making sub-optimal decisions trying to save an airplane.
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I was in a seminar where Rod Machado asked a big room full of GA pilots what was the most expensive airplane they fly. Hands go up: "Bonanza" "P210" "King Air", etc. Rod proceeds to correct them, (I'm paraphrasing) "The most expensive airplane you fly is probably worth $100 or less to you. Your insurance deductible."

It's an important message.
 
Buy a second airplane and insure it as primary, and state that you'll only fly this one 5000 miles or less per year.

Hey, It works with cars!
 
Jeff Oslick said:
I was in a seminar where Rod Machado asked a big room full of GA pilots what was the most expensive airplane they fly. Hands go up: "Bonanza" "P210" "King Air", etc. Rod proceeds to correct them, (I'm paraphrasing) "The most expensive airplane you fly is probably worth $100 or less to you. Your insurance deductible."

It's an important message.
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If it were a pile of 350,000 dollar bills would you let it burn or spend $12,000 to insure most of it?

I'm not thrilled about my insurance premium, but I'd be far less thrilled for my hull value to go up in smoke uninsured.
 
If you have enough investments to replace the plane, I would take $120k of that and invest it in a 10% dividend stock and use the dividends to pay the premium.
 
NealRomeoGolf said:
If you have enough investments to replace the plane, I would take $120k of that and invest it in a 10% dividend stock and use the dividends to pay the premium.
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Where are you all getting these 10% every year returns? I certainly didn't see them in 2022.
 
EdFred said:
Where are you all getting these 10% every year returns? I certainly didn't see them in 2022.
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I beat the market most years. I have a stock that pays a 10% dividend every quarter. I've thought of putting money in an "airplane endowment" and having that be my annual fund for flying. It's a lot of eggs in one basket though.
 
NealRomeoGolf said:
I beat the market most years. I have a stock that pays a 10% dividend every quarter. I've thought of putting money in an "airplane endowment" and having that be my annual fund for flying. It's a lot of eggs in one basket though.
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If it's a guaranteed 10%, there are no eggs to be broken.
 
NealRomeoGolf said:
Nothing is guaranteed.
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So the 10% every year doesn't actually exist. I'm talking like a 10% CD, none of this "well, sometimes I get 10%, and sometimes I don't" type of investment. Anyone can find those.
 
I carried hull coverage on my Maule for 19 years…only totaled it twice, and almost came out ahead in the end.:rolleyes:
 
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