Drone Insurance 101
According to the Federal Aviation Administration (FAA), there are nearly one million drones registered in the U.S. and over 200,000 certified remote pilots who hold a small Unmanned Aircraft System (sUAS) rating.
Drones are classified as aircraft by the FAA and equivalent regulatory bodies around the world. Because aviation or aircraft exposures are typically excluded from general business or homeowner’s policies, it is important to fully understand your insurance and risk management options to protect yourself appropriately.
Global Aerospace and other companies provide comprehensive UAS policies that are tailored to each individual operator. Insurance can be provided for operators in a variety of fields, whether in real estate photography, construction or agriculture. The insurance industry and offerings available to protect businesses can be confusing. This article will help explain the options.
What Is Drone Insurance?
There are two components to a drone insurance policy. Most drone insurance policies afford third party liability coverage. Many operators choose to add physical damage, or hull coverage.
Third Party Liability
Third party liability insurance protects the policyholder against liability to others in the event that property is damaged or people are injured while a UAS is operated.
A policyholder can purchase additional coverage for personal injury liability (for example, to protect against claims for invasion of privacy), non-owned liability (which applies to property damage or bodily injury caused while operating someone else’s drone), medical expenses for others, premises liability and war perils (such as damage resulting from a malicious act).
- Standard limits: Limits are between $1M and $5M.
- Additional limits: Limits of $25M and higher are available for insureds who commit to following good operating procedures and using pilots with appropriate training.
- Premium: For a single drone carrying a $1M limit, the cost will typically be around $575 per year. Premium for operators who have multiple drones will be considerably lower than that, especially as the number of insured units increases.
A comprehensive UAS policy typically includes:
- Worldwide application
- Medical expenses
- Legal defense
- Contractual liability
- Invasion of privacy
- Bail bonds
Physical Damage Coverage (or Hull Coverage)
Physical damage coverage affords insurance for damage to a policyholder’s drone and other items that are used to support the drone business. It is a common addition to a UAS policy. Many would equate it to coverage for damage to an automobile in the event of an accident.
In addition to coverage for physical damage to the drone, some operators choose to purchase insurance for physical damage to other UAS-related equipment, such as expensive thermal cameras, multispectral or LiDAR equipment, gimbals, tablets, controllers or a carrying case. Physical damage insurance is recommended for most independent operators as the loss of their equipment can severely impact their business.
- Premium: A percentage is applied to the insured value of the UAS to calculate the premium. For example, for a drone with an insured value at $1K with an 8% hull rate, the hull premium would be $80. Rates vary based on exposure for the unit, use, utilization, loss history, pilot experience and type of drone.
- Deductibles: Deductibles are the amount the insurer will deduct from the loss before paying up to the replacement cost. Typical deductibles are 5% to 10% of the unit’s insured value, while higher deductibles can apply to more expensive units.
What Else Should You Consider in a Policy?
Insurance policies often include a pilot warranty, which can limit the individuals who are insured under your policy. Policies should provide a broad pilot warranty that allows flights with any appropriately licensed pilots.
Some UAS manufacturers offer warranties that provide some level of coverage for physical damage events. If you do purchase such a warranty with your drone, it is important to understand the “fine print” and determine whether there are exclusions that apply in the event of, for example, theft or complete loss of the drone.
Insurance for claims arising out of the use of drones which are not owned by the insured is available to protect against liability claims and claims arising out of physical damage to rented equipment. Often, operators need to rent high-valued camera equipment for certain jobs. Short-term rental insurance or annual policies that provide flexibility to rent equipment throughout the year are usually available from your insurer. Non-owned liability coverage also applies to situations where other operators are flying on behalf of the primary insured.
Certificates of Insurance and Additional Insureds
Operators are typically required to show evidence of insurance prior to arriving on the job site, usually in the form of a Certificate of Insurance. A certificate may also be required by a party who requires additional insured status. While some companies will impose a charge for each certificate issued, many insurers do not.
Pick Your Partner
In addition to the policy provisions, it is important to work with insurers who understand the drone business, offer the flexibility needed to operate efficiently, provide timely responses and have an experienced claims team in the event the worst happens. Some even offer free or discounted safety resources and courses, similar to those offered by Global Aerospace through its partnership with DARTdrones.
How To Get Coverage
Purchasing an aviation insurance policy is not like purchasing auto or other insurance, where one can simply log onto a provider’s website. Due to the unique nature of aviation insurance, to purchase a policy, you need to go through an intermediary.
While that producer can take the form of online portals, mobile phone apps or a traditional broker, there are no direct options to purchase insurance. And, unlike auto or other lines of insurance, where there are multiple options, your options for purchasing drone insurance are somewhat limited to a handful of markets.
Global Aerospace and other insurance providers work with several of the leading drone producers, wholesalers and agents.