6 Types of Aviation Insurance Policies You Should be Aware About
Insurance sector has expanded its area of operations to include numerous other industries and sectors. Aviation industry is one such example. Post-9/11, aviation insurance has come to the forefront by offering necessary and reliable services. Aviation insurance has become so commonplace and essential at the same time that some types of aviation insurance covers have now been made mandatory.
On 11th September 2001, four airplanes travelling from the north-eastern US to California were hijacked by four groups of a terrorist organization named Al-Qaeda. Their sole motive behind this hijacking was to take control of their respective flights and crash these flights into prominent American buildings. Accordingly, the twin towers of the World Trade Center, the Pentagon were attacked. The fourth plane which was intended to hit a prominent building in Washington D.C., crashed near Pennsylvania. The 9/11 attacks remain the deadliest terrorist attacks in human history with more than 2,500 casualties and several wounded. Though, the main talking point in the aftermath of the attacks was regarding rise of global terrorism, a parallel debate sprung up regarding aviation safety. Though, any form of transport involves some inherent risk, but the risk is somewhat greater when travelling by an airplane. Hence, a new sector of insurance is getting popular these days, i.e., the aviation insurance sector.
Aircraft or aviation insurance, like any other insurance policy, provides property coverage and legal liability to the aircraft. Typical aviation insurance policies provide cover for number of things, such as damage to the aircraft, damages to the cargo in the aircraft and passenger injuries, etc. Nowadays, the scope of coverage of aviation insurance policies is increasing rapidly. As a result, the global aviation insurance market is also on the rise. As per the market analysis of Research Dive, the global aviation insurance market is predicted to grow at a healthy CAGR of 5.20% in the 2021-2028 timeframe.
What are the Different Types of Aviation Insurance Policies?
As stated earlier, aircraft insurance policies cover a lot of things. As a result, different options are available to the involved stakeholders to opt for an insurance policy that suit their needs. Based on the options offered, there are several types of aviation insurance policies. They are:
- Public Liability Insurance: Also called the third-party liability, this type of aircraft insurance policy covers damages caused to third-party entities and properties, such as houses, other aircrafts, cars, shops, etc. This type of insurance policy is mostly mandatory for almost all aircraft companies across different countries.
- Passenger Liability Insurance: This type of aviation insurance policy covers damages arising out of passenger injuries and final expenses arising out of passenger death. Even this insurance policy is mandatory for almost all aircraft companies. Nowadays, some insurance companies also provide liability cover for passenger cargo in this type of insurance policy.
- Combined Single Limit: This aviation insurance policy, as the name suggests is a combination of the two insurance policies mentioned above: public liability insurance and passenger liability insurance. This insurance policy sets an overall limit on payout per accident and also provides more flexibility to the insurance policy holders for fulfilling their liabilities.
- Ground Risk Hull (Non-Motion) Insurance: This aviation insurance policy covers for damages sustained to the aircraft when it isn’t in motion. Such damages include natural disasters, fires, wind, lightning strikes, theft and other such crimes, etc.
- Ground Risk Hull (In-Motion) Insurance: This insurance policy covers damages that an aircraft may sustain while being in motion. This aircraft insurance was the most controversial one, as many insurance companies didn’t provide cover for damages occurred during take-off and landing. Many insurance companies, subsequently, discontinued this aircraft insurance.
- In-Flight Insurance: This is the most comprehensive and hence, the most expensive type of aircraft insurance policy. This aircraft insurance policy covers all types of damages sustained, irrespective of whether the aircraft is in motion or not.
The different types of insurance policies mentioned above, thus, help all the major stakeholders; the aircraft company, passengers, aircraft operators, third-party entities, etc. by providing liability cover for damages in their own unique ways. Also, tragic air accidents, especially the horrendous 9/11 attacks and the disappearance of the MH370 flight, have been an eye-opener for all these participants. Both these factors have contributed to the growth of the global aviation insurance market.
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