C I RR US

January/ February 2008

PIL T
The Official Magazine of the Cirrus Owners & Pilots Association

Volume 3 Number 1

Inside: Cirrus Model History and Market

Deciding Which Form of Ownership is Right for You Assessing the Value of your Cirrus Taxes, Training, Insurance and More!

Special Buyers Guide

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Insuring Your Bird
by David M. McCoy

ts a beautiful fall afternoon, the trees have changed and the air is crisp what a great day for flying. You just bought your new or pre-loved Cirrus and are ready to soar with the eagles. The pre-flight is complete; you strap yourself and your passengers in, and complete the pre-start checklist. CLEAR, the engine roars to life. The gauges show green, fuel is full, everything is secure and you are ready for takeoff. Oftentimes, the last thing pilots think about is insurance. Are you covered? Do you have enough coverage? Did you pay too much this year? These are things that you typically only have to consider once a year and rarely discuss otherwise. Insurance is a key line of defense in protecting your family and assets. Its worth understanding how aviation insurance is different from other types of insurance, how much you should buy, the quoting process, and what to look for in the future regarding insurance specific to Cirrus aircraft.

Whats Different About Aviation Insurance

Aviation insurance is different from other types of insurance due to the uniqueness of the risk involved and a somewhat old-fashioned way of doing things. It is the kind of insurance that, if not evaluated by an aviation insurance specialist, may cost you more than it should in annual premiums and expose your family and estate in the event of a catastrophe. Many have heard the tales of how contacting one broker can prevent you from getting additional competitive quotes from another. This is true to a certain extent; many underwriters will still only work with one broker at a time on a risk (insurance talk for airplane and owner to insure). Typically an underwriter will quote to the first broker that presents the risk to them. Once they have quoted a particular broker, they will not quote to others unless the insured asks for the quote to be released via a Broker of Record letter. This letter is your ability to reassign or fire one broker and hire another. It gives the new broker the authority to market you to the
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underwriters, but if the information given to the underwriters by the first broker has not changed, then the quote will remain the same. It is important that the first call you make is to an aviation specialist who knows Cirrus aircraft. The broker is NOT the person setting the price, the underwriters do, but it is the brokers job to get you the best price available for the coverage you need. Up until the last two years, the aviation insurance marketplace has had nine aviation insurance underwriters, eight of which write business through independent brokers and one which writes direct. When dealing with the direct writer, you will receive only one option (theirs), unlike a broker, who will present you with several options from different underwriters. The number of aviation underwriters has been increasing the last few years, with as many as five new ones, but to date only one of those has started writing for the smaller single engine piston aircraft market, such as Cirrus, Cessna, Mooney, and Beechcraft. In the future, look for some of these new companies to start writing policies for the single engine aircraft market.

How Much Insurance to Buy

The age-old question of how much coverage is enough is only partially dictated by you, the aircraft owner. The rest is determined by what is available from the various underwriters. In a catastrophe, your estate and the lawyers will always assume you bought the most coverage available, but due to the cost involved, that is not always the case. Be sure you and the rest of your family knows the consequence of buying a lower limit when higher is available. First, lets look at what makes up the insurance premium. Aviation insurance policies are broken down typically into three parts; physical damage coverage, liability coverage, and medical payments. physical damage coverage, otherwise know as hull coverage, deals with the physical aircraft itself. It is the largest component of the premium and usually makes up about 85 percent of the total amount. It is the insurance that pays when you have a hard landing, damage a wing tip or strike that eagle you were soaring with.
January/February 2008

The physical damage coverage is typically written as a stated or agreed value, meaning in the event of a total loss you are paid the value stated on your insurance policy, not market value. One underwriters policy labels the coverage as insured value. With insured value the underwriter has the option to replace your aircraft with one that is of like kind and quality. The key to purchasing the correct amount of hull coverage is evaluating the current market value of your aircraft. Many times the purchase price is the initial factor, and may not include the additional equipment installed. The main purpose for physical damage coverage is, in the event of a total loss, you are buying insurance to replace your aircraft with one of a similar kind and quality, not necessarily a new one. liability coverage is the portion of the policy that provides protection for bodily injury and property damage to others. It is typically written on a peroccurrence basis and often will contain sub-limits for passengers flying in your aircraft; usually described as $1,000,000 each occurrence, limited to $100,000 each passenger. Unfortunately this is the most some pilots will be able to obtain, especially early on in their flying career. When higher limits are discussed, it is often referred to as a combined single limit or smooth and is when NO passenger sub-limit exists. This gives you the full policy limit of coverage on passengers should you need it and is considered much better protection than a policy with a sub-limit. The downfall for an SR22 is it is tough to qualify. Minimums are usually an instrument rating, 500-plus hours total time and can cost $500 to $1,000 in additional premium. Insurance over $1 million is also available to more qualified pilots, but it can be expensive. Please Note: Your personal or business umbrella policy usually excludes aviation losses, so do not assume that it provides you any additional protection. The last type of coverage is medical payments, which is often overlooked but is an additional line coverage that is adjustable with most underwriters. The standard coverage is $3,000 for each person and limited to the number of seats in the aircraft. You can adjust the amount up to $5,000, and sometimes $10,000, for each person for an additional premium. This is a coverage that is applicable to the passengers and the pilot, even if he
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is the owner. The coverage is payable independently from the liability and is designed to offset initial emergency expenses like health care deductibles, co-pays and even funeral expenses.

Controlling Insurance Costs

There are several additional things you can do to control your initial and annual insurance costs. One of the main discounts for pilots of the SR22 series aircraft is the instrument rating. The next major factors reducing premiums are for overall experience and time in type. If you are in the market for a Cirrus and you have not started training for your instrument rating, buy the aircraft, pay the additional premium and train in your aircraft. The benefits of getting your instrument rating in your own aircraft at your pace far outweigh the additional premium cost. If you are close to getting your ticket, try to complete it before you take possession of the aircraft. You will appreciate the savings. Once a policy is in effect, it is re-rated on an annual basis, and reviewed based on the current information available just prior to renewal. A key to lower insurance costs is making yourself marketable to as many carriers as possible. Talk with your broker as to what you can do to increase the number of underwriters who will bid for your business. A few final things to consider in your purchase of a Cirrus. Being considered as Technically Advanced Aircraft (TAA), many underwriters require training above and beyond what you would typically see in older aircraft. Be prepared to do the initial transition training program developed by Cirrus. In many cases you can use a local Cirrus Standardized Instructor (CSIP) to complete this training. Annual recurrent training is also crucial. Pilots can develop bad habits quickly and having an annual skill review can only improve safety. There are many avenues and resources to get this training such as COPAs Cirrus Pilot Proficiency Program (CPPP) and many qualified CSIPs. For more insurance information, check out the COPApedia insurance section and archives on the COPA forum. COPA
About the Author: David McCoy is a private instrument rated pilot with 10 years of experience in aviation insurance, including roles as an underwriter and a claims adjuster. He holds a B.A. from Central Missouri State University and is a Legal Principles Claim Specialist through the American Educational Institute. Dave is the Branch Manager for the Light Aircraft Division for NationAir Aviation Insurance and can be reached at dmccoy@nationair.com.
CIRRUS PILOT

The Quoting Process

First, ask around and research who other Cirrus owners use for writing their insurance. Word of mouth is usually a much stronger recommendation than advertising. After you have selected a broker to work with, give them the information they request and let them run with it. Be truthful and as accurate as possible. Things are more easily addressed in the quoting process, than later on, after coverage has been bound and a potential claim exists. After collecting your information, your broker will send a quote request to all the markets/underwriters that are quoting your aircraft and experience level. When they receive the quotes, they should all be presented to you with the differences explained. Once you make your decision on coverage, the broker will bind your coverage on the date you take possession of the aircraft, handle all required certificates and send you an invoice for the premium quoted. There should be no additional fees added to the quoted premium, unless it is a state tax they are required to collect, or you are financing the premium. A broker is paid a commission on the premium quoted to you, not in addition to.

What the Future Holds

Rates for Cirrus aircraft have remained very stable over the last two-plus years. Late 2005 had several large accidents, as did 2006, but the benefits of having an increased fleet size have kept rates from rising, even though losses in 2006 probably came close to or exceeded earned premiums with some underwriters. The underwriters have seen the success of the chute and its saving of lives. As of this writing, there were two saves from chute pulls in 2007. The insurance industry considers the chute a good thing, and it can control their exposure on the liability side, but they are still most likely going to pay a total loss on the aircraft, so the savings on the hull premium is not really affected. Remember, liability premiums are usually less than 15 percent of the hull premiums sometimes as low as six percent.

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