Any insurance plans for high-deductible, low premiums?

[Bret Hess]

I haven't heard of plans that offer low premiums in exchange for say $2000-3000 deductible. Anyone know of one?

[[email protected]]

Sure you've heard of it, just insure it for $3000 less than it's value. Insurance for our ships is purely based on value insured. Each $1K of value cost $x in premium. I'm carrying a $20K deductible on mine, and $5K deductible on the trailer. I figure if the ship is damaged that much, likely so am I. Try L.L. Johns and associates John Gostinger if you don't have a firm you like. I've had very good experience with them since 2008.
~Barny

[[email protected]]

On Sunday, January 18, 2015 at 5:09:59 PM UTC-5, wrote:
> Sure you've heard of it, just insure it for $3000 less than it's value. Insurance for our ships is purely based on value insured. Each $1K of value cost $x in premium. I'm carrying a $20K deductible on mine, and $5K deductible on the trailer. I figure if the ship is damaged that much, likely so am I. Try L.L. Johns and associates John Gostinger if you don't have a firm you like. I've had very good experience with them since 2008.
> ~Barny

Under insuring is the best way I know to end up with your repairable glider as a total insurance loss.
It is false economy.
UH

[John Cochrane[_3_]]

On Saturday, January 17, 2015 at 9:05:09 AM UTC-8, Bret Hess wrote:
> I haven't heard of plans that offer low premiums in exchange for say $2000-3000 deductible. Anyone know of one?

I asked Costello about this. Basically, I wanted a policy in which I didn't pay premiums to cover other pilot's busted canopies ($5,000 item). I wanted low cost insurance for big disasters only. His answer was interesting. We're just too small a market for that kind of variety.

Then I busted the canopy. $5,000 later, I was glad he said no! But when you put in a claim, they raise your rates for a few years, ending up clawing back about $2,500 in higher premiums, plus the deductible. So, when you think about it, your current policy is really a $3,000 deductiible.

John Cochrane

[[email protected]]

Hank, what am I missing? I understand my own choice is more severe, but his inquire was for a $3K deductible.
Value Damage Insurance Deductible Action Settlement Net Cost
$70,000 $60,000 $67,000 $1,000 Repaired $59,000 -$1,000
$70,000 $65,000 $67,000 $1,000 Repaired $64,000 -$1,000
$70,000 $67,000 $67,000 $1,000 Totaled $66,000 -$4,000
$70,000 $70,000 $67,000 $1,000 Totaled $66,000 -$4,000
~Barny

[Papa3[_2_]]

On Sunday, January 18, 2015 at 6:45:19 PM UTC-5, wrote:
> Hank, what am I missing? I understand my own choice is more severe, but his inquire was for a $3K deductible.
> Value Damage Insurance Deductible Action Settlement Net Cost
> $70,000 $60,000 $67,000 $1,000 Repaired $59,000 -$1,000
> $70,000 $65,000 $67,000 $1,000 Repaired $64,000 -$1,000
> $70,000 $67,000 $67,000 $1,000 Totaled $66,000 -$4,000
> $70,000 $70,000 $67,000 $1,000 Totaled $66,000 -$4,000
> ~Barny

What you're missing is the fact that the insurance company will generally draw the line at something in the neighborhood of 70% to maybe 80% of the insured value before calling the deal a "total" ($50k-$55K in your example). In that case, they figure they're better off paying you the insured value, taking the glider AND all of the instruments as salvage, then bidding out the salvage. So, each of the above examples would end up with you no longer owning the glider. Repair shops love these situations, because it enables them to bid on wrecks that can be rebuilt and sold at a decent profit.

That aside, the example isn't really accurate anyway. In fact, the rating is is a little more complex. While there is a "per X of insured value" component, there are other factors included. Still, at something in the neighborhood of $40 to $80/1000 of insured value, trying to finesse your coverage to save $100 to $200 against $70K asset seems like a poor bargain.

FWIW, I asked a bunch of questions like this when I was working on project for a major commercial carrier with an aviation business. It turns out that small programs like ours tend to be pretty marginal, especially as the value of individual sailplanes continues to escalate. So, the willingness to offer a lot of variations in the coverage is pretty minimal.

[[email protected]]

The goal was to trade $3-4K deductible for reduced premiums. At $50K damage, he's still only out $4K ($66K settlement), which meets the goal. I'm aware of the salvage process having bid on one, but I can't see how that affects the math. In any total the ins co gets the wreck (as planned). I'm only a math guy so in the end I defer to your wisdom.

[Eric Greenwell[_4_]]

Papa3 wrote on 1/18/2015 5:42 PM:
> On Sunday, January 18, 2015 at 6:45:19 PM UTC-5,
> wrote:
>> Hank, what am I missing? I understand my own choice is more severe,
>> but his inquire was for a $3K deductible. Value Damage Insurance
>> Deductible Action Settlement Net Cost $70,000 $60,000 $67,000
>> $1,000 Repaired $59,000 -$1,000 $70,000 $65,000 $67,000 $1,000
>> Repaired $64,000 -$1,000 $70,000 $67,000 $67,000 $1,000 Totaled
>> $66,000 -$4,000 $70,000 $70,000 $67,000 $1,000 Totaled $66,000
>> -$4,000 ~Barny
>
> What you're missing is the fact that the insurance company will
> generally draw the line at something in the neighborhood of 70% to
> maybe 80% of the insured value before calling the deal a "total"
> ($50k-$55K in your example). In that case, they figure they're
> better off paying you the insured value, taking the glider AND all
> of the instruments as salvage, then bidding out the salvage. So,
> each of the above examples would end up with you no longer owning the
> glider. Repair shops love these situations, because it enables them
> to bid on wrecks that can be rebuilt and sold at a decent profit.
>
> That aside, the example isn't really accurate anyway. In fact, the
> rating is is a little more complex. While there is a "per X of
> insured value" component, there are other factors included. Still,
> at something in the neighborhood of $40 to $80/1000 of insured value,
> trying to finesse your coverage to save $100 to $200 against $70K
> asset seems like a poor bargain.
>
> FWIW, I asked a bunch of questions like this when I was working on
> project for a major commercial carrier with an aviation business.
> It turns out that small programs like ours tend to be pretty
> marginal, especially as the value of individual sailplanes continues
> to escalate. So, the willingness to offer a lot of variations in the
> coverage is pretty minimal.

As I understand it, the premium is not directly proportional to the
insured value; ie, insuring a plane for $50,000 instead of $100,000 will
not cut your premium in half, but by much less than half. The rationale
is most insurance claims are for much smaller amounts than the insured
value. That's also the reason a high deductible can make a significant
difference in premiums: the company doesn't have to mess with a lot of
small claims (the majority of the dollars they pay out), and that are
also relatively expensive to process.

So, knocking $3000 of the insured value would not save you nearly as
much on the premium as a $3000 deductible.

--
Eric Greenwell - Washington State, USA (change ".netto" to ".us" to
email me)
- "A Guide to Self-Launching Sailplane Operation"
https://sites.google.com/site/motorgliders/publications/download-the-guide-1
- "Transponders in Sailplanes - Feb/2010" also ADS-B, PCAS, Flarm
http://tinyurl.com/yb3xywl

[[email protected]]

On Sunday, January 18, 2015 at 6:45:19 PM UTC-5, wrote:
> Hank, what am I missing? I understand my own choice is more severe, but his inquire was for a $3K deductible.
> Value Damage Insurance Deductible Action Settlement Net Cost
> $70,000 $60,000 $67,000 $1,000 Repaired $59,000 -$1,000
> $70,000 $65,000 $67,000 $1,000 Repaired $64,000 -$1,000
> $70,000 $67,000 $67,000 $1,000 Totaled $66,000 -$4,000
> $70,000 $70,000 $67,000 $1,000 Totaled $66,000 -$4,000
> ~Barny

I was commenting on the concept I understood you were describing that would under insure you by 20K on let's say, a 70K value. The insurance company will total the ship at about 70% of their coverage, or at about 35K. At that point you are out a glider and 20 short of replacing it with the same.
If a provider will give you a good rate for, say 3-5 K deductable, and you are comfortable with that level of loss, cool. Creating what I will call "apparent deductable" by under insuring is, in my experience, false economy. Before I would do that, I would drop trailer coverage, based on likely exposure, and properly cover the glider.
I see a fair number of 20K gliders insured for 15K. Bang the nose, and break the canopy, and it is totaled because it can't be fixed for 10K.
FWIW
UH

[Papa3[_2_]]

On Sunday, January 18, 2015 at 9:36:08 PM UTC-5, wrote:
> The goal was to trade $3-4K deductible for reduced premiums. At $50K damage, he's still only out $4K ($66K settlement), which meets the goal. I'm aware of the salvage process having bid on one, but I can't see how that affects the math. In any total the ins co gets the wreck (as planned). I'm only a math guy so in the end I defer to your wisdom.

Rereading this, I realized didn't reply carefully enough, because (to a certain extent) your table didn't make sense. The table doesn't really tell a story, because it's not answering the question. The real question is (or should) be: what is the total cost (premiums paid + deductible + underinsured amount) to the owner under various loss scenarios? What you'd need is a grid that shows a mix of premiums and deductibles both at full value and at the amount of underinsurance and showing various non-totaled and totaled scenarios. Oh, and you'd need to show this over time (e.g. one year horizon, two year horizon, etc.)

The answer will tend to be that the savings in premiums is probably not worth it for anything other than radically underinsuring, in which case the risk exposure risk is significantly higher. As mentioned elsewhere, the rating tables are not linear from dollar zero of hull value. As an example, I recently upgraded gliders with a new glider worth slightly more than double the old one. The increase in premium was less than 50%. In dollar figures, it was a little less than $10/$1000 increase in hull value.

Your exact rating depends on a number of factors related to pilot experience and ratings, loss history, etc. but in the example above trying to back into a "high deductible" by underinsuring by say $5K would be a really dumb move.

[Bret Hess]

On Saturday, January 17, 2015 at 10:05:09 AM UTC-7, Bret Hess wrote:
> I haven't heard of plans that offer low premiums in exchange for say $2000-3000 deductible. Anyone know of one?


Thanks for the discussion. In the end, I'm going with LL Johns, which is 20% cheaper than Costello, with the same coverage I think, with the same deductible, so it's close enough to what i was looking for.

I did find out talking to the LL Johns agent John Gostinger that the underwriter (USAIG) is a different one from the one Costello uses (AIG), even though the names are similar. I'm glad there's some competition. For USAIG, I'm guessing that the AIG in that name comes from Aircraft Insurance Group rather than American Insurance Group.