J.T. Helms

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Frequently Asked Questions About 'VanGaurd' Aircraft Insurance  
by J.T. Helms.   JT, of NationAir insurance, (the VanGaurd Program) can be reached through email or at 877.475.5860.

Added 3/14/2003
Doing away with Aviation Insurance Agents
Or, what does my agent really do?

Many airplane owners do not understand why agents exist, what value good ones add to the process, nor why the insurance market for aviation acts the way it does sometimes. I hope to enlighten you a bit with this article including some thoughts on why it wouldn't be a good idea to scrap the way aviation insurance works now and have all companies become direct writers.

Some airplane owners try to "shop" their insurance by contacting various agencies. They get frustrated because they do a lot of work themselves, only to find that the other agents they call cannot get quotes for them. Or, they can foul up the renewal process if they’ve “shopped” their insurance mid-year. Your agent should be checking various insurance companies for you, and the insurance companies will only work with one agent at a time. The other agents you call will likely not be given quotes from most of the companies if your current agent is doing a good job for you and checking the available and appropriate markets for you. You can always choose the agent you desire by doing so in writing. This Broker of Record letter fires your current agent and hires the new one. It does not change the quotes your current agent has already requested at all if the information given doesn’t change. The agent you desire can assist you with wording such a letter. You can always get quotes from the direct writer insurance companies, of which there is only one right now. But as you'll see below, that isn't all that it's cracked up to be.

Why don't we just do away with the agent system as it exists in insurance markets such as aviation where there are so few insurance companies? That could happen some day, but I doubt that it will, and it wouldn't be good for you the consumer anyway. The reason is that every single year, you personally would have to contact every insurance company from which you wanted a quote. There are seven companies that currently use agents plus the direct writer. You'd have to get get the contact info (phone, website, etc) from all eight, get them your info, and wait for quotes from each. That’s relatively easy. It is not quite as easy as dealing with one person (your agent) but easy enough.

However, then you come to the hardest part. The daunting task of picking through each offer and deciding on your own which company's policy to pick. Do you pick the cheapest? Do you choose the one with the best policy wording? Do you request a sample policy from each company and read each one? Will you understand the differences? Which one's have good claim service? Which one's provide good service during the year (adding/deleting pilots, getting certificates, etc.) The only advice you'd get would be that which you had gotten from each individual company. Those companies (as has been my experience with the only direct writer available today) would have no impetus to tell you the negative things about their policy. They will tell you the basic offer, and perhaps some of the advantages to buying their coverages, but they won't highlight their weaknesses. You’ll have to determine those on your own.

With the way the system works now, you choose an agent that you like to deal with and that you trust (perhaps they’ve been referred by others or even the manufacturer of your airplane). And yes, anyone that approaches you works for either an agency or the direct writer (even someone affiliated with an association.) That agent which you choose does all of that which I’ve described above for you. They should be working for you as your advocate, advisor, and service provider. You should get their independent opinion about the quality of specific policies, and stability of companies, and reputations of those companies (for example on how well they pay claims, etc.) That agent should do all of that for you, by getting your most updated info, and sending it out to the companies for you, consolidating the data and presenting it to you in a concise format. Additionally, they should be there to answer questions you may have or compare and contrast policies for you.

The agent also does very valuable services for the insurance companies that they do not wish to do. Those are collections of payment, sales/marketing, various paperwork, answering daily questions, etc. If they don't have agents do those things, then they have to hire quite a large staff to handle those functions anyway, and they'd prefer to pay the slight commission to other crazy fools (agents) to handle that chaos for them. It is a bargain for the insurance companies. And the customer gets a hassle free product with independent advice every year, just by filling out updated info, and communicating with one person.

If you provide the most up to date and complete info to your agent, and you ask them questions about comparing and contrasting quotes for you, if your agent doesn’t do that automatically, then you will get the best deal that you can on your aviation insurance. If you have an agent that you like and trust, you can turn your attention to other things. I should think that the prospect of not having to read eight insurance policies every year alone would be enough to change your mind about eliminating the agency system.

John “JT” Helms is the Branch Manager for NationAir Insurance Agencies, Inc’s Light Aircraft Office. They service light aircraft owners all over the country from their Chesterfield, MO offices. You can visit their website at www.nationair.com or email JT at jhelms@nationair.com

Added 1/18/02
To file a claim or not to file a claim, that is the question.
You should turn a claim in (either thru your agent or directly to the company) regardless of how big or small you think it is or even if you weren't at fault (see FAQ below titled "Someone else crashes into me...").  Until you have been contacted by the insurance company, and they send you a "Proof of Loss" form, and you fill that out and return it, no claim has been made.  This gets you the advice of a claims adjuster, and your agent regarding your claim without having officially made a claim yet. 
In my professional opinion, unless the claim is so small as to be under the deductible amount you should turn it in.  That is what you bought the insurance for.  If it is very small (in the insurance company's eyes... under $2500), you most likely will see no increase in premium at all.  If it is larger than that, you might see a slight increase in your premium for 3 years (some companies up to 5 years if you had a total loss or a loss over 50K).  By slight increase, I mean somewhere in the neighborhood of 10 to 20%.  Normally, the increase is so small that it would take 50 or more years of the insurance company charging you that increase to recoup what they paid out for you in the claim. 
Although some of you might want to abandon the company that paid the claim for "punishing you", remember 2 things:
First, when there is a recent (usually within 3 years) claim, most companies will decline to quote you.  AND I would advise you to make sure the info about the accident is in on the quote request (and if you do get a quote, on the subsequent application) because if the new company doesn't know about it, they will find out if you have another claim, and could void your coverage for failure to disclose pertinent underwriting information.  If you aren't planning on disclosing all pertinent information, don't waste your money on insurance, because you could be paying for coverage that would merely be voided when the company does find out.
Second, some companies do keep "black lists" of customers that they do not wish to insure at any cost.  Getting on a company's list could be accomplished in many ways like moving away from a company within a few years of them paying out a large claim for you, being extremely difficult with a claim, or intentionally responding falsely to questions on an application are among them.  In an insurance market as exists today, with very few markets out there to compete on your business, losing even one more competitor for your business because of your actions is not good.  (remember, you may not necessarily keep the same airplane and may need to move to a new company in the future, or the company you move to might change it's appetite for business and stop covering your type of aircraft... spurning even one company could hurt you in the future.)
You aren't going to pay a higher premium forever, and the increase you may be worried about is most likely not going to be as bad as you envision.  For those of you who don't have claims, you should want those who do to pay higher premiums for a little while, as that keeps your premiums down, and makes those that do file claims pay a little more. 
Just please remember your position on this issue when you do have a claim and you call me to complain about your rates going up slightly.  (The following is a joke) Maybe the insurance companies should require insureds to answer that as a question on their applications....perhaps it could read... "Do you think those who have claims should pay slightly increased premiums for 2-3 years, or do you think that everyone's premiums should go up?"  That way we would have you on record (because I know how all of you perfect pilots will respond!!)


Added 10/5/01
Will the events of September 11, 2001 affect my insurance rates?  If yes, then why?  Yes, I believe that aviation insurance will be affected by the tragic events recently.  The same companies that insure small aircraft insure the airlines.  None of them will go out of business because of it, but most of them took a big hit.  (On risks that large (i.e. the airlines) the companies spread the risk amongst themselves and each take a percentage of the premium and they share the losses based on those percentages so as to not risk bankruptcy from one enormous accident.) 

All of the companies further protect themselves by RE-insuring.  This means that every year they contract with a huge RE-insurance company to further spread their risk.  The insurance company promises to pay up to $xxx in physical damage claims and up to $yyy liability claims for a small portion of the premium.  Every thing over those amounts is paid by the RE-insurance company.  Every insurance companies RE-insurance was hit (and hard) on September 11th.  (They do this to a smaller degree on small aircraft.  Usually, the insurance company would pay for the entire physical damage claim (because it is relatively small) and RE-insures part of the liability.) 
RE-insurance companies RE-insure lots of stuff not just airplanes.  The RE-insurance companies will probably also get hit for the WTC's building insurance, the business interuption insurance carried by the tenants, life insurance, etc.  So, I believe that you will see insurance premiums on all property increasing (cars, homes, business).
Before you complain that this is unfair and that it shouldn't affect you and your little airplane, please remember that this is how insurance works:  Total premiums minus expenses go into a pot and claims are paid out of that pot.  If the pot is getting empty, then premiums go up.  If the pot is getting full, premiums go down.  Terror took a big dipper out of the pot in early September. 
RE-insurance and risk sharing may seem like voodoo, or unnecessary tools.  Perhaps, you might say, "forget about RE-insurance, that'll lower their costs and ours."  That would mean that we would have probably lost completely 2 insurance companies overnight.  That would leave 4 that are truly competitive with light aircraft (and that are financially worthy of your premium $ (A rated or better)).  I don't think that less competition in the aviation insurance market today would be a good thing. 
All that being said.  The rates should not immediately be affected.  The two insurance companies that were hit hardest in the recent tragedy renegotiate their RE-insurance treaties (contracts) on January 1.  That will be our first real indicator of what is to come for next year.  Other treaties renew throughout the year.  I believe we will see some increases.  I have no idea what they will be.  If I had to make an educated guess, I would say that increases in your aviation insurance would be 10% or less.

Added 5/25/01
Why does my policy include Mexico as a coverage territory and then take it away? 
Most Pleasure and Business policies include coverage for Mexico (please read your policy to verify). However, the Mexican Government requires that you carry a certificate of insurance issued through a Mexican insurance company. If you get stopped and don't have a certificate showing liability coverages, you and your aircraft can be detained. Most of the companies either have an affiliation with a Mexican insurance company or they own one. Most companies charge $50-$100 to produce the certificate to cover the trip (some charge that for the entire year). The certificate does not provide you with more coverage, it merely proves to the Mexican Government that you do have coverage. The certificate is usually written for the minimum required by Mexican law (around 3 Million pesos, not very much in $) because its purpose is only to satisfy that requirement of having the certificate. 

The policy for the VanGuard Program does cover Mexico, but the insurance company does not have an affiliation with a Mexican company so they cannot provide that service. However, there are companies that will (for around $50-75) provide you with a short term policy (2-3 weeks). This would be a seperate policy, and if you had an accident, both this short term policy and your VanGuard policy would be in force.

Added 4/6/2001
Will my choice of engines affect my insurance?
Yes.  The VanGuard Program (as well as all other insurance companies that I am aware of) will not cover aircraft that have converted automobile engines in them.  The Program actually goes a little further and requires that your engine be of the type and horsepower recommended by Van's Aircraft for your type of aircraft.  And obviously, the value (and thus the insurance) will be affected by the differences in engine type you choose (e.g. used O-360 vs. New IO-360).

Added 4/2/2001:
Does my policy cover me for an engine failure?  (Also asked as, "Why doesn't my policy cover engine failure.) 
I would answer that as a yes.  If you have an engine failure, you're in motion coverage will cover the resulting damage.  However, all Pleasure and Business policies (including the VanGuard Program's policy) exclude wear and tear and electrical malfunction.  This means that the policy is designed to cover damage that is the result of an engine failure, but the engine repair itself probably would not be covered.  (i.e. you crash land in a field - damage to the airframe, landing gear, etc. could be covered by the policy but it won't cover the repairs of the engine.)  If you purchase a new or overhauled engine, it typically comes with a warranty of some kind.  The warranty is designed to repair mechanical failure of the engine. 

This is not to say that this type of policy will never pay for an engine repair (because the next question that is always asked in these situations is - "why am I insuring the value which includes value for the engine if it won't ever be covered?")  A prop strike with sudden stoppage of the propeller often time damages the engine.  The insurance policy will often cover teardown and repair of the engine after such an occurence.  (This is much different for policies covering aircraft with turbine engines, but none of you have those on an RV.) 

Another example of the wear and tear exclusion:  Blown tires - a tire blows on takeoff and your aircraft rapidly exits the runway on a vector that is not intended and hits the fence.  In Motion coverage on your policy is designed to cover damage from this type of occurence but will not pay for the replacement of the tire itself.

These (3) Questions Added 2/2/01:
There is only one or two insurance company out there right? 

No. There are about 9 A or A+ rated (by A.M. Best) aviation insurance companies for general aviation aircraft. Of those 2 are markets that specialize in transitioning pilots or antique aircraft (higher risk, higher premiums). Almost all companies write coverages for homebuilts now, but 2 of the companies just started in 2000. Those 2 are not extremely competitive yet and are really just testing the waters, because they want to play in the homebuilt market in the future and want some experience. 

Why did an agent tell me he was blocked from getting a quote? 
All but one of the insurance companies that we agents deal with (and AVEMCO the direct writer) block the market for as much as 3 months when an agent asks them for a quote. This means that if you call a second agent, when he checks that company for a quote, they will not give him one. If you sign a Broker of Record Letter (BOR or AOR agent of record), for the agent that you want to work for you he will then be able to get the quotes that are out there for you. The best idea is to find an agent that you like and trust and allow him to check all the markets for you. AOPA getting you a quote at Oshkosh will block the markets because they are an agency like any other.

Someone else crashes into me - should I turn in a claim? Won't that go on my record as a claim? 
Yes, and yes sort of. I would highly recommend turning a claim in even if you were not around and someone else ran something into your airplane. Your insurance company will usually pay to fix the airplane right away and subrogate against the other persons insurance to recover their money. Or they will arrange with the other persons insurance for you and make sure they do everything they are supposed to in a timely fashion. If you do not turn in a claim, the insurance company will not know about it, and will not be there to help you. The insurance companies usually (look the next time you fill out an application for aviation insurance) ask two seperate questions: 1) Has the applicant had any aviation losses/claims in the last X years. and 2) Has any pilot named above ever been involved in any accident or incident. So the answer would be yes to #1 and no to #2. There is always a space for you to explain your answers (albeit a small one). You should answer honestly and put a full explanation (even if you have to use an extra sheet.) I firmly believe that no underwriter would adversely rate your policy for an isolated incident that you had no control over.

Why did you quote me $1 Million of liability coverage limited to $100,000 per passenger? My aircraft has 2 seats. That is only $200,000! 
The upper
limit is a per occurrence limit. It can apply to damage to other aircraft, buildings, etc and people hurt outside the aircraft. Our programs policy does not limit recovery for bodily injury of those hurt outside the aircraft.

My family could get $100,000 of coverage if I crash my plane and die, right?
No, because you would be the owner of the aircraft and the policy,
you can't really be liable to yourself (can't sue yourself). The liability coverages are for damages you cause to others and their property. If hurt, you could recover the coverages for medical payments, however, because they include crew members.

What is the medical coverage for and why is it so low?  If I crash the plane, my passenger could be in the hospital for a long time and $3000 wouldn't cover the cost! 
The $3000 of medical coverage that the VanGuard Program offers is intended to cover incidental medical costs that you or your passengers might incur on or about your aircraft. Your passenger does not have to sue you to recover these costs. If someone was seriously hurt, they can recover costs under the liability section of the policy. The medical coverage does cover crew (owner of the plane is covered by this coverage).

What are the differences between your policy and AVEMCO?
There are three major differences. 1) AVEMCO's liability coverage if limited is limited per person. Our liability coverage if limited is limited per passenger. Example: Someone hurt or killed outside of your aircraft sues you for $500,000. AVEMCO would only pay the first $100,000 of that, whereas our coverage would pay for the entire amount. 2) AVEMCO limits family members to 25% of any sublimit (If sublimit is $100,000 per person, your family member could only receive $25,000.) To my knowledge, no other policy (including VanGuard) in the aviation insurance industry limits their policy in this way. 3) In fairness, AVEMCO does offer liability coverage to you (that our policy does not) for liabilities you might incur due to the sale of your aircraft. The coverage extends beyond the end of the policy.

Does your policy cover first flight?
Yes, if you meet the program requirement of either having a checkout in an RV from a CFI or having 25 hours in RV series aircraft in the last year.

Will adding a pilot increase my premium?
Perhaps, the premium is figured on the lowest level of experience of any one pilot. (Adding a higher time pilot to a lower time pilots policy shouldn't increase the cost, adding a lower time pilot to a higher time pilots policy might increase the cost.)  The number of pilots may increase the premium cost, though, if the number of pilots is 4 or more. The insurance companies begin rating policies as flying clubs at that point.

Tailwheel versus tricycle gear?
Tailwheel rates are only about 10% higher than tricycle gear rates. The only requirement to get the program rates is a tailwheel checkout, however, if your RV time and Tailwheel time are both high you could be eligible for discounts. In tricycle gear there are discounts available with high RV time as well (with no tailwheel requirement.

What will positively affect my rates the most?
Your total time in all aircraft is the biggest factor. Your RV time (and tailwheel time if applicable) could make you eligible for additional discounts).

What value should I insure my aircraft for?
Should I include value for my labor? This is really up to you. There is no bluebook value on homebuilts. Aviation insurance policies are written as Agreed Value (Insurance company and you agree on its value, and that is what would be paid minus deductible in a total loss). Cars are usually written as Market Value or Actual Cash Value policies (value is determined at the time of the loss).  Obviously, there are some major things that can affect the value: New/used/reman'd engine, pro/amatuer paint, IFR/VFR panel, etc. I have RV's insured for around $40K and some upwards of $110K. If you want to insure it for above $80K, we only need a quick list of the panel and a description of the engine, paint, etc. to justify it.
I do recommend insuring it close to the market value. Example: If you insure it for $40K (cost of just the parts in it to keep the premium cost down) and it is worth more, and you crash the plane and do $40K worth of damage to it, it is then a total loss. In a total loss, the insurance company would pay you (or your estate) the agreed value minus the deductible. Then they own the salvage. The insurance company for the VanGuard Program does not write what is known as 'first right of refusal' by the former owner into their policy. But normally will offer the salvage to you first (after offering it to salvage dealers to accurately estimate the value). If the value left in the salvage is $15,000, and you buy it back, then in this case you have only about $25,000 to fix $40,000 in damage. So you may have saved money on the premium, but you have lowered your coverage more than you may realize. I recommend against underinsuring your plane so you never get in a situation of having to buy back salvage from your insurance company.