Introduction to Renter S Insurance

Introduction to renter’s insurance. What is non-owned liability coverage? What is subrogation? What about the rental agreement I signed? I thought I only had to pay the deductible? What type of aircraft am I permitted to use if I purchase a non-owned liability policy? What limits of bodily injury and property damage liability should I carry? What limits of aircraft damage liability should I carry? Do I or my immediate family have protection if we're injured? Is there a deductible on the aircraft damage liability coverage? What effect does pilot experience have on non-owned insurance premiums? Who should purchase a non-owned policy? When should I purchase a non-owned policy? I want to borrow a friend's aircraft. My friend said it would raise his insurance premium too much to add me as an approved pilot. Am I covered if I purchase a non-owned policy to fly his aircraft even though I'm not an approved pilot on his insurance policy? Will a non-owned policy protect me if I use a non-owned aircraft for other than my own pleasure and business use? If I rent a non-owned aircraft for an incidental business trip, how can I protect my employer? What happens if I have to report a claim? What is an A.M. Best rating? What rating should I look for in an insurance company? How can I recognize the differences in non-owned insurance policies? If I have a non-owned policy and I later decide to purchase my own aircraft, can I cancel my non-owned policy? My FBO told me that I'm covered under his insurance policy when I rent his aircraft. Why do I still need renter's insurance?

Introduction Many pilots have a misconception that aviation insurance policies, like automobile policies, are “standardized”, and that all policies are alike. In addition, many non-owner pilots think they are covered under the aircraft owner’s or FBO’s insurance policy when they use a non-owned aircraft. This is far from true, which is why we’ve developed these "frequently asked questions" to help you make an informed decision when purchasing protection for yourself. Your own needs may vary from those of other pilots, and you should take them into account when choosing which coverage and policy to buy. An important factor to consider when selecting an insurance policy is the financial stability of the company that writes your insurance. Request a sample policy prior to making a purchase, and compare it to your current policy if you’re already insured. Do the necessary research to ensure you are making the best decision. If you need any further information after reviewing these questions and comparing sample policies, please give us a call toll-free at 1- 888-241-7891, and we’ll be happy to help you sort through your options. Back to Top

Q: What is non-owned liability coverage? A: It is a liability insurance policy to protect you as a non-owner pilot against claims arising from bodily injury or damage you may have caused to others or to their property when using a non- owned aircraft. Your insurance company’s commitment is to defend you if you are sued, and if you are at fault, to pay for the damages according to the terms of the policy. This coverage is not medical or life insurance, but rather, liability coverage for claims made against you by third parties for which the law holds you legally liable. This includes damage to the non-owned aircraft if you purchase aircraft damage liability coverage. Bodily injury and property damage liability coverage and aircraft damage liability coverage are generally the two types of coverage you can purchase under a non-owned policy. Back to Top

Q: What is subrogation? A: It is the right of an insurance company to recover from a legally responsible third party, such as a non-owner pilot, for the payment of a covered claim to its policyholder, such as a flight school. This right to “subrogate” is found in almost every insurance policy and upon payment of a claim entitles the insurance company to all of the policyholder's legal rights of action against responsible third parties for the loss paid. It is common practice for insurers of flight schools to “subrogate” against renter pilots to recover their payment for damage over the deductible. Back to Top Q: What about the rental agreement I signed? I thought I only had to pay the deductible? A: Yes, you probably will be responsible for the deductible. If you purchased aircraft damage liability coverage from Avemco, we will pay up to $1,000 of the owner’s deductible regardless of fault. However, it is not the only thing you may be responsible for. Some operators hold their renters responsible for loss of income during the time the aircraft is down for repairs and depreciation of the aircraft’s value due to its damage history. In addition, if the operator’s insurance company pays for the damage above your deductible, they can subrogate against you for the cost of the damages they paid. Back to Top

Q: What kind of aircraft am I permitted to use if I purchase a non-owned liability policy? A: Most, if not all, policies state that the non-owned aircraft must have a standard airworthiness certificate, single engine, United States registration, fixed wings and may not have a turbine engine. However, the maximum engine horsepower, the aircraft’s seating capacity and your ability to use pressurized aircraft varies significantly among insurance companies. Be sure you tell your insurance company the type of aircraft you will be using. Back to Top

Q: What limits of bodily injury and property damage liability should I carry? A: Because different people have different needs, there is no standard recommended amount of liability coverage you should carry. You need to consider factors such as your personal assets, earnings, liability limits you carry on your other insurance policies such as auto or homeowners, whom you carry as passengers, and how much insurance you can afford, among others. You might want to ask your insurance representative about the most popular limits purchased by owners of comparable aircraft. Obviously, buying the most coverage you can reasonably afford is your safest bet. Back to Top

Q: What limits of aircraft damage liability should I carry? A: A guideline in the selection of your aircraft damage liability policy limit would be the value of the non-owned aircraft you usually fly. Buying coverage for the highest value non- owned aircraft you fly is your safest bet. Back to Top

Q: Do I or my immediate family have protection if we’re injured? A: The non-owned liability insurance policy responds only if you are legally liable for an accident, and in many cases, a lawsuit may need to be brought against you for your negligent injury to third parties. Several policies, including Avemco's, provide a limited amount of liability coverage for family members. Avemco’s Direct Approach® Non-Owned Aircraft Insurance Policy provides up to $5,000 in personal injury protection, including up to $100 per day for in-hospital care for you and your immediate family if they are injured because of your use of a non-owned aircraft. Back to Top

Q: Is there a deductible on the aircraft damage liability coverage? A: This may vary among companies. Avemco does not have a deductible on its aircraft damage liability coverage. Back to Top

Q: What effect does pilot experience have on non-owned insurance premiums? A: Generally none. Premiums are based on the limits of coverage you select. Back to Top

Q: Who should purchase a non-owned policy? A: Any pilot who rents or borrows someone else’s aircraft should purchase a non- owned policy. Even if you are receiving dual flight instruction and not acting as pilot in command in a non- owned aircraft, you may be held responsible for any damages or injuries arising from your negligence. Do not make the common mistake of assuming that you are covered under the owner’s insurance policy, or that not being pilot in command relieves you of liability if you contribute to the cause of an accident, or that you won’t be sued in any event. Back to Top

Q: When should I purchase a non-owned policy? A: When you first start your flying lessons. Back to Top Q: I want to borrow a friend’s aircraft. My friend said it would raise his insurance premium too much to add me as an approved pilot. Am I covered if I purchase a non-owned policy to fly his aircraft even though I’m not an approved pilot on his insurance policy? A: Yes. You have liability coverage from your non-owned aircraft insurance policy. However, your friend will have no coverage under his insurance, because you were not an approved pilot on that policy. Although your friend wasn’t flying his aircraft at the time of the accident, he may still be sued and will have to pay all his legal costs and any judgment out of his own pocket. Therefore, while you are protected under your policy, you should still either be a named pilot on his policy or meet the qualifications of his open pilot clause, if it is provided. Back to Top

Q: Will a non-owned policy protect me if I use a non-owned aircraft for other than my own pleasure and business use? A: Generally, no. Non-owned policies do not provide coverage if you use a non- owned aircraft for any activity for which you get money or other benefits, such as carrying passengers or cargo for hire, rental, and aerial photography; or for any special uses like parachute jumping, maintenance test flights, and traffic patrol. Back to Top

Q: If I rent a non-owned aircraft for an incidental business trip, how can I protect my employer? A: For an additional premium, most insurance companies like Avemco can add your employer to your policy as an additional insured. Your employer cannot be named if it is an aviation business however. In that instance your employer should have its own aviation-related commercial business coverages. Back to Top

Q: What happens if I have to report a claim? A: Avemco’s claims are administered by CTC (Aviation) Inc. CTC has offices strategically located across the country staffed by trained professionals to quickly and professionally handle your claim. CTC can be reached by calling (800) 874-9124 up to 4:30pm EST, Monday thru Friday, or (888) 635- 4303 in the event of an emergency. In areas not serviced by staff offices, CTC uses a network of independent adjusters who are closely monitored by CTC. After a claim is reported, you can expect to be contacted by a CTC representative who will gather information for review to determine the most appropriate means of resolution. A field adjuster should contact you within 24 to 48 hours after a claim is reported. CTC works closely with insureds, repair shops, claimants and attorneys to resolve claims in as expeditious a manner as is possible. When considering an insurance policy, it is of critical importance to find out which company performs the claims adjusting services; standards vary widely. This is when you will call on your insurer to provide the services provided for in the policy. The best-written, best-priced policy is of little value if your company lacks in performance on the claims end. Back to Top

Q: What is an A.M. Best rating? What rating should I look for in an insurance company? A: The A.M. Best rating reflects an insurance company’s financial strength and its ability to meet its obligations to policyholders. The rating categories range from A++ and A+ (Superior) to F (in liquidation). It is recommended that you select an insurance company that holds an A++ or A+ (Superior) rating, and specializes in aviation insurance. Back to Top

Q: How can I recognize the differences in non-owned insurance policies? A: Because aviation insurance is not regulated extensively by state law, policy language varies considerably. In fact, many companies are not always licensed in all states in which they do business (surplus lines companies), nor are their policies necessarily approved in all states. Be sure to ask for a sample policy in an easy-read format and review it to understand what is and is not covered. Since every renter pilot has different coverage needs, be aware that the least expensive policy may not provide the best protection to meet your needs. Also be aware that policies with the same "limits" will not in many instances provide the same coverage. Back to Top Q: If I have a non-owned policy and I later decide to purchase my own aircraft, can I cancel my non-owned policy? A: Yes. If your non-owned policy is with Avemco and you insure an aircraft you purchased with Avemco, you can cancel your non-owned policy. We will pro-rate your cancellation and transfer your credit to your owner policy. When you insure your own aircraft with Avemco, our Direct Approach® Aircraft Insurance Policy provides automatic non-owned liability coverage and it also includes coverage for damage to a non-owned aircraft; both to the extent of the coverage you have purchased for your aircraft. Back to Top

Q: My FBO told me that I’m covered under his insurance policy when I rent his aircraft. Why do I still need renter's insurance? A: How do you really know if you are covered? It is not safe to just ask the FBO about its coverage. Experience has shown that an FBO may not fully understand or realize that its insurance coverage does not generally extend to renter pilots. The only way to determine if coverage is provided by the FBO’s policy is to read and understand that policy. You also have to either rely upon the FBO or contact its insurance company directly every time you fly to verify coverage is still in force and has not been canceled for some reason, such as failure to pay the premium. Even if you live in one of the few states that require the FBO to carry renter’s liability coverage, there is a chance that the FBO may not be fully aware of the law, or the coverage may be inadequate for your needs. Its most prudent not to rely on someone else’s insurance to protect your own assets. A non-owned aircraft liability policy is an easy, inexpensive way to give you peace of mind when dealing with the unknown hazards confronting the non-owner pilot. Back to Top

These questions and answers are general in nature and are not intended to address the specific requirements of an individual’s policy. These should be discussed directly with one of Avemco's trained staff. In all cases, the terms and conditions of the policy will determine the outcome of a specific situation.