Wednesday, December 14, 2016

Do you need DRONE insurance?

Depends on what you are doing with the drone, your appetite for risk and how deep your financial pockets are. There is an anonymous saying I like “flying is not inherently dangerous, but crashing is”.  If you have a risk of crashing you might have a need for insurance.

Risk can be handled in a number of ways.  You can take the risk on yourself (self-insure), you can stay away from risk (don’t fly), reduce the risk (better training, safety systems, only fly on calm days) and you can transfer the risk to someone else. 

Insurance is basically transference of risk. You are transferring the risk of your drone to the insurance company for a fixed smaller amount of premium. They hope you will not crash and they will not have to pay a claim. But for that privilege they have requirements that you are to follow. 

When do you need to consider buying insurance for your drone?

Are you flying as a hobby or recreational use?
If you are flying your drone as a hobby or recreation and you are not operating in the commercial category, most likely your homeowners (if you have one) policy will cover the liability insurance. Homeowners insurance might even cover the drone for theft or losses other than crashing. You would be subject to the homeowner policy deductibles. I don’t sell typical homeowners so I can’t tell you the details, but make sure you contact your homeowner’s insurance company and ask to know for sure.

Are you flying for hire? 
Commercial drone insurance is usually considered aviation insurance.
Reason I am saying aviation is because once you decide to make the transition to commercial operations, the homeowner insurance companies really do not want the risk. Aviation insurance companies already understand aircraft risk so the transition to drones is actually a little bit easier. In fact, many of the aviation insurance companies have been providing drone coverage for years but on a bigger scale. Just in the past couple of years did they start opening there “doors” to smaller more general aviation drone operators.

Commercial drone insurance coverage
1.     Liability
2.     Drone hull coverage
3.     Extra scheduled equipment

Typically, liability coverage in an aviation insurance policy will be for property damage and bodily injury.  You need to know the basic insurance definitions to understand the coverage.  The following definitions were taken from various policies and simplified as best as possible.

“Property damage” means any physical damage to “tangible” property.  This coverage does not cover the aircraft itself, any of your own property or property that you are in charge of.  This is just for the property belonging to others that was damaged by the accident.  This damage might include the loss of use of the property.   Example; houses, automobile, crops etc.

“Bodily injury” liability means the physical (bodily) injury to or the death of a person.
What does aircraft liability insurance protect you from? If you have an accident in your aircraft, the liability coverage will protect you from lawsuits from people that are injured, any of the heirs from anyone that is killed in the accident AND from anyone that has property destroyed or damaged.

But it is important to remember that the policy limit is typically the maximum the insurance company is responsible for (payments and legal defense).

Hull coverage is the protection you are buying for the actual cost of the drone and equipment attached to the drone.  Aviation insurance is generally an “agreed value” policy.  That means if you have a total loss, the claims department will pay the stated value of the “drone” on the policy (minus your deductible).  This is different from your auto insurance.  As an owner it is your decision to value the drone at a reasonable level.    Most underwriters will allow you to pick the value based on the type of drone and equipment and the age. Or they may request that you provide proof of the value (receipts etc). 


That’s the basics of the type of coverage that are available.  For  more information or with any questions, contact me, Scott Sky Smith "Name on the door". 

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