More on High Performance Insurance

On Fri, 12 Dec 2003 17:41:57 -0700, "Tom" wrote:


"ArtP" wrote in message
.. .
On Fri, 12 Dec 2003 19:55:13 GMT, "Jay Honeck"
wrote:


While this is considerably better than the "$15K per year" I was told
earlier, it's still an astounding amount to pay for insurance, IMHO. And
it
sounds like Cirrus owners will be looking at some pretty big increases.

Actually there have not been any crashes lately and some people are
reporting that their rates have gone down. I have 400 hours and I am
paying $6,000 per year.


That is about what you could expect in a really high performance home
built/retract. (when you could find insurrance and have over 600
retract time)

Roger Halstead (K8RI & ARRL life member)
(N833R, S# CD-2 Worlds oldest Debonair?)
www.rogerhalstead.com
Return address modified due to dumb virus checkers
Insurance actuaries do not base their rates on "lately".

On Sat, 13 Dec 2003 02:49:39 GMT, ArtP
wrote:

On Fri, 12 Dec 2003 21:45:26 -0500, "G.R. Patterson III"
wrote:


So, you insure the plane for half what it's worth. Then some clown runs into
the aileron with the lawnmower and does $1,000 damage. The insurance company
totals the aircraft, puts $1,000 into repairs, and resells it for a nice profit.

Enjoy your settlement.

Although under insuring the plane gives you a built in deductible. If
you only insure the plane for 1/2 of its value you wouldn't file a
claim until the cost of repair exceeded 1/2 the value of the plane so
your example would not happen.

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull. That means if your plane is worth 300,000,
you insure it for $150,000 and the damage is close to that, they can
total the plane, give you a check for $150,000, repair the plane and
sell it for $300,000. Pretty good profit for them and loss for you.

As to your example of not filing a claim until the cost exceeded half
the value, it would only guarantee the insurance company would total
it out and you'd be out half the value of the plane.

Never be under insured. It's as bad, or even worst than over insured
which is just wasted money. Under insured can be downright expensive.

Roger Halstead (K8RI & ARRL life member)
(N833R, S# CD-2 Worlds oldest Debonair?)
www.rogerhalstead.com
Return address modified due to dumb virus checkers

Roger Halstead writes:

So, you insure the plane for half what it's worth. Then some clown runs into
the aileron with the lawnmower and does $1,000 damage. The insurance company
totals the aircraft, puts $1,000 into repairs, and resells it for a nice profit.

Although under insuring the plane gives you a built in deductible. If
you only insure the plane for 1/2 of its value you wouldn't file a
claim until the cost of repair exceeded 1/2 the value of the plane so
your example would not happen.

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull.

[...]

As to your example of not filing a claim until the cost exceeded half
the value, it would only guarantee the insurance company would total
it out and you'd be out half the value of the plane.

Never be under insured. It's as bad, or even worst than over insured
which is just wasted money. Under insured can be downright expensive.

Both coverages have their uses though. We have some people (like me)
who insure their hulls for replacement cost. Others don't insure them
at all (using aircraft insurance, at least).

Underinsuring can be a middle ground. If saving some premium cost is
worth the risk of having to eat, for example, up to half the cost of
the plane if there's a problem, then it might make sense.

--kyler

Roger Halstead wrote:

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull.

Not exactly. Somebody hit my left flap with something like that, and that's what
the damage was. In my case, the FBO covered the deductible and insurance took
care of the rest. As ArtP points out, if I had been carrying only half value
hull insurance, it would not have been smart to present a claim, so I would've
been out $950.

The rest of your post is right on, of course.

George Patterson
Great discoveries are not announced with "Eureka!". What's usually said is
"Hummmmm... That's interesting...."

"Roger Halstead" wrote

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull. That means if your plane is worth 300,000,
you insure it for $150,000 and the damage is close to that, they can
total the plane, give you a check for $150,000, repair the plane and
sell it for $300,000. Pretty good profit for them and loss for you.

As to your example of not filing a claim until the cost exceeded half
the value, it would only guarantee the insurance company would total
it out and you'd be out half the value of the plane.

Never be under insured. It's as bad, or even worst than over insured
which is just wasted money. Under insured can be downright expensive.

Roger, you are correct in that over insuring is just a waste of money.
However the rest of your analysis is flawed.

In your example above, the 300K aircraft sustains 150K of damage.
In that case, whether the owner submits a claim or not, he is out
150K. If he doesn't submit a claim, he would spend 150K to fix the
airplane with no help from the insurance company. If he did submit
a claim, most likely the insurance company would total the aircraft
and give the owner a check for 150K (the insured hull value). So
for the owner to be able buy another equivalent aircraft he would
have to find another 150K somewhere. The insurance company doesn't
loose anything in this situation, but it doesn't make any profit either
as you have claimed. If it fixes the airplane the insurance company
can sell it for $300K, but it pays 150K to the insured and 150K to
the mechanics so it is a wash.

So the insured pilot is out 150K, but the original poster wasn't
suggesting the pilot do this unless he could afford that loss.

If the damage were more than 150K then the pilot is better off
submitting a claim, but he is still out 150K.

Now if the damage is less that 150K, then the pilot increases his
loss by submitting a claim and the insurance company could show
a profit by totaling the airplane, and this profit increases as
the damage gets less. If the claim is small enough, most insurance
companies would pay for the repair despite the potentially large
profit from totaling the airplane. Perhaps this is to protect
their reputation by avoiding questionable ethics, however it
would be foolish to count on that with so much at risk. For that
reason, declaring a hull value of half the airplane's value is not
such a good deal, because you are not getting a lot of value from
the insurance relative to its cost. (You wouldn't be able to submit
a claim in more than half of all accidents since they would cause
less than 150K in damage). Also you could be caught making the wrong
decision about whether to submit a claim because you miss-estimated
the damage. By the time you know, it might be too late to change
your mind. You would get a better deal if you could just
declare a large deductible. Most insurer's formulas would have
the premium declining dramatically with increasing deductible.
(I've done that with one of my cars). However I don't think many
aircraft insurers allow you to choose the deductible, so usually
only an all or nothing decision is practical regarding hull insurance.

~Paul

On Sat, 13 Dec 2003 10:48:59 -0500, "G.R. Patterson III"
wrote:



Roger Halstead wrote:

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull.

Not exactly. Somebody hit my left flap with something like that, and that's what
the damage was. In my case, the FBO covered the deductible and insurance took
care of the rest. As ArtP points out, if I had been carrying only half value
hull insurance, it would not have been smart to present a claim, so I would've
been out $950.

I keep forgetting planes vary over a very wide value, even the ones we
fly for fun.

Roger Halstead (K8RI & ARRL life member)
(N833R, S# CD-2 Worlds oldest Debonair?)
www.rogerhalstead.com
Return address modified due to dumb virus checkers

The rest of your post is right on, of course.

George Patterson
Great discoveries are not announced with "Eureka!". What's usually said is
"Hummmmm... That's interesting...."

On Sun, 14 Dec 2003 01:18:15 GMT, "Paul Mennen"
wrote:

"Roger Halstead" wrote

I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull. That means if your plane is worth 300,000,
you insure it for $150,000 and the damage is close to that, they can
total the plane, give you a check for $150,000, repair the plane and
sell it for $300,000. Pretty good profit for them and loss for you.

As to your example of not filing a claim until the cost exceeded half
the value, it would only guarantee the insurance company would total
it out and you'd be out half the value of the plane.

Never be under insured. It's as bad, or even worst than over insured
which is just wasted money. Under insured can be downright expensive.

Roger, you are correct in that over insuring is just a waste of money.
However the rest of your analysis is flawed.

Ur right.

Roger Halstead (K8RI & ARRL life member)
(N833R, S# CD-2 Worlds oldest Debonair?)
www.rogerhalstead.com
Return address modified due to dumb virus checkers

"Paul Mennen" wrote:

Roger, you are correct in that over insuring is just a waste of money.
However the rest of your analysis is flawed.

In your example above, the 300K aircraft sustains 150K of damage.
In that case, whether the owner submits a claim or not, he is out
150K. If he doesn't submit a claim, he would spend 150K to fix the
airplane with no help from the insurance company. If he did submit
a claim, most likely the insurance company would total the aircraft
and give the owner a check for 150K (the insured hull value). So
for the owner to be able buy another equivalent aircraft he would
have to find another 150K somewhere. The insurance company doesn't
loose anything in this situation, but it doesn't make any profit either
as you have claimed. If it fixes the airplane the insurance company
can sell it for $300K, but it pays 150K to the insured and 150K to
the mechanics so it is a wash.

I think the point is that if they repair the aircraft they pay 150K
with nothing to show. If they total it they pay 300K but end up with a
300K aircraft, so they are 150K ahead.

If the damage was 100K they could repair it for 100K, or total it and
pay 100K repairs plus 150K for the hull, and end up with a 300K
aircraft again - again 150K ahead of where they'd be if they just
repaired it.

I think in this situation if the aircraft is reasonably repairable,
the insurance company is always going to be ahead if they total it and
repair and sell it themselves, rather than paying for repairs without
totalling the aircraft.

"Roger Halstead" wrote in message
...
I think George was being a bit facetious with the lawn mower and
$1000, but it wouldn't take a lot of structural damage to reach half
the value of the hull. That means if your plane is worth 300,000,
you insure it for $150,000 and the damage is close to that, they can
total the plane, give you a check for $150,000, repair the plane and
sell it for $300,000. Pretty good profit for them and loss for you.

As to your example of not filing a claim until the cost exceeded half
the value, it would only guarantee the insurance company would total
it out and you'd be out half the value of the plane.

Never be under insured. It's as bad, or even worst than over insured
which is just wasted money. Under insured can be downright expensive.

You misunderstand the original posters intent. He/She said that decreasing
the hull value is a way of raising the deductible. So in your example, by
cutting the hull value in half on a $300,000 plane they had decided on a
$150,000 deductible. So in the pay-off you describe they got what they paid
for, a $150,000 deductible and a $150,000 payout. You may not think that's a
good idea, but to each their own set of choices.

Under-insured is just changing the cost of the risk, it's a perfectly
legitimate tactic, if you understand what you're doing. Yes, if you just do
it to lower the premium you're a bit dense, but if you understand the
trade-off then there's no problem.

Mat


--
Matthew Waugh
Comm. SEL MEL, CFI-AI
http://home.nc.rr.com/mwaugh/learn2fly/index.htm

The basic flaw in the concept is that the goal if insurance companies is to
somehow make money on repairs and claims is simply not true. They make their
profits through investments of the premiums which we pay.

Paying claims to customers is viewed simply as a cost of running the
business. Spending a lot of time getting repair estimates and settling
disputes costs them money, regardless if the damage was your fault or not.
If you make any claims or have an FAR violation you can expect your rates to
increase or possibly even be dropped by the carrier.

Again, the best approach would be to maximize your liability coverage to
protect your personal assets as well as those of your family, possibly
consider having the plane owned by a corporation rather than an individual
ownership, and insure the hull value only to the level where you feel
comfortable paying cash for any possible repairs.