How Much Aviation Liability Insurance Does a Business Need?

How Much Aviation Liability Insurance Does an FBO or MRO Need?

There is no single liability limit that is appropriate for every aviation business. The right amount depends on the operation, contractual obligations, aircraft and property exposure, business assets and the potential severity of a loss.

That may be less satisfying than a simple dollar figure, but it is the more responsible answer.

Start with the exposures—not the insurance quote

A liability-limit discussion should consider factors such as:

• The size and type of operation
• Number of locations
• Types and values of aircraft handled
• Passenger and public exposure
• Fueling operations
• Maintenance and completed-operations exposure
• Products sold
• Contractual insurance requirements
• Assets that need protection
• Potential severity of a major claim

An MRO regularly working on high-value business aircraft has a different loss profile from a small operation handling lower-value equipment.

Contracts can establish minimum limits

Airport leases, customer agreements and other contracts may specify insurance requirements.

Those requirements matter—but they should not automatically be treated as the correct risk-management limit.

A contract may tell you the minimum someone else requires.

It does not necessarily tell you the maximum loss your business could sustain.

Don't let a carrier's maximum become your risk strategy

Another mistake is assuming that the maximum limit offered by the primary insurer is automatically “enough.”

It may simply be the maximum that insurer wants to write.

Aeris’s source material notes that additional capacity may be available through excess liability or, in some situations, quota-share arrangements involving multiple carriers.

The question should therefore be:

“How much liability should this business prudently carry?”

—not merely—

“How much will this carrier sell us?”

Treat liability limits as a business decision

There is judgment involved.

Management, the aviation insurance specialist and other risk advisers should consider the realistic exposure and the organization’s tolerance for uninsured risk.

And because the business changes, that discussion should not happen only once.

If aircraft values, revenue, contracts, services or locations have changed, old liability limits deserve another look.

Aeris Insurance Solutions can review your current limits against your operation and contractual requirements as part of a Coverage Risk Review.

Common questions:

• What Insurance Does an FBO or MRO Need?
• Does General Liability Insurance Cover “Hangar Rash” to a Customer Aircraft?
• What Is Hangarkeepers Legal Liability?
• Named Insured vs. Additional Insured: What’s the Difference?
• Does Aviation Liability Insurance Cover Aircraft You Operate but Don’t Own?
• How Much Aviation Liability Insurance Does an FBO or MRO Need?
• Should Your Insurer Review Hangar Leases and Service Contracts?