While aircraft insurance policies can be put on hold during extended periods of grounding such as during the current Covid-19 crisis, the cost savings don't outweigh the risks for most operators, Aviation Specialty Insurance president Matt Drummelsmith told AIN.
“The smaller operators are feeling a pinch because people aren’t taking flight lessons or tours right now,” he said. “For them, we can usually switch coverage to ground-only, which removes the flight portions of their coverage while keeping the airframe fully insured. This is a quick fix to help with expenses for the short term but there must be a commitment to the grounding period, usually a minimum of 30 consecutive days.”
If they have it, larger operators can take advantage of a lay-up provision in their policy that returns premiums for extended periods of inactivity, Drummelsmith said. “However, for those operators, insurance isn’t a substantial expense relative to other operating costs. A business jet operator could be saving tens of thousands of dollars per week just in fuel costs alone. To change anything with their insurance would be immaterial economically, relative to what they’d be giving up.”
Operators taking drastic measures to save a few dollars in the short term could have bigger ramifications long term, according to Drummelsmith. “People simply can’t afford to have their larger assets exposed. Any uncovered loss to those items could be financially crippling beyond recovery. These are certainly tough times, but people should make considerations in other places before they jeopardize or reduce their insurances.”