Cancelling your insurance coverage after a loss. Good idea?

Your aircraft has suffered a gear up landing. Your insurance carrier has been notified, and the repair of the aircraft is underway. You don’t have a lien on the aircraft with a bank, so you decide that since the aircraft won’t be flying until repairs are complete, a smart move would be to either cancel the insurance, place the coverage on a ground not-in-motion basis, or maybe apply for a lay-up credit, all to save premium dollars.

Here are the reasons that’s not a good idea or not possible:

1. Cancel your Insurance

Some owners think that since the aircraft is in a repair shop, the maintenance facility’s insurance should protect it. While the maintenance facility might have insurance, it only protects the maintenance facility for their liability if your aircraft is damaged by their negligence, not for acts of God [e.g., tornado]. If you cancel your insurance and a tornado collapses the hangar on the aircraft, their policy will not respond, and you are left with no insurance.

2. Remove Flight Coverage

You’ve had a claim for which you paid an annual premium. To save money while your aircraft is being repaired, you ask the insurer to place your coverage on a ground, not-in-motion basis. Your insurer will decline. You paid an annual premium for your coverage, to which they are entitled until the claim is complete.

3. Lay-Up Credit?

If you have a corporate turbine aircraft, you more than likely have what’s called a lay-up credit under your policy. However, this only applies if your aircraft is down for extended maintenance, not a covered loss. In addition, the aircraft has to be down a minimum number of days [30-45] before this credit can be applied.

This is one of many nuances in aviation insurance. If you are ever in doubt about any aspect of your coverage/policy, contact your AssuredPartners Aerospace broker for a discussion.