Drone Insurance: An Ultimate Beginner’s Guide to Liability and Drone Hull Insurance

Insurance as a concept means protection from financial loss, and this risk management tool is an efficient phenomenon to face contingent losses. We have insurance for everything important, including our homes, health, cars, ‘toy’ vehicles, etc.

Drone Insurance is the newest buzz worldwide in the sector of drones, and if business is being conducted, getting drone insurance is a smart move. Drone insurance is a relatively new product. However, its benefits are many (specifically for you professional pilots). Not only does it protect you in case of an accident, but it also protects your clients and shows them that you’re truly professional, verified, and allows them the comfort of security. Often times, they will ask if you have drone insurance during the hiring process, and even if they don’t ask, it makes you look more professional and it assures you that you haven’t lost all that money if something happens to your business’s main asset.

First of all, do you even need drone insurance?

It is important to note that your homeowner’s insurance likely does NOT cover use of your drone, even if you’re just flying recreationally in your own yard.

Some companies insure drones in addition to their other policies, some insure only drones, and others will only insure you if plan to pilot your drone commercially as a professional pilot.

Drone insurance is not mandatory in the US. However, some companies will only hire drone pilots who have a certain amount of insurance. In Canada, though, you must be covered for at least $100,000 liability if you’re operating commercially.

In some instances, you might need a minimum level of insurance coverage to take on a project, whether it’s working with a larger company that requires insurance for each of its vendors, or needing to secure a city film permit.

All serious UAV pilots have liability insurance. It’s a strong, credible indicator for your business prospects, and shows that you’re professional and reputable.

For those pilots who plan to fly a drone commercially, this guide covers:

  • What is drone insurance?
  • Accident and liability coverage
  • What types of coverage are available?
  • How much is drone insurance?
  • How to get drone insurance?
  • Companies that offer drone insurance
  • Process of Filing an Insurance Claim

 

What is Drone Insurance?

Drone insurance acts like any other insurance policy, which means that it will cover you to a certain extent if you lose your drone or have an accident. Insurance agents who provide coverage for drones have said that they like to insure pilots who have been trained to fly their drones.

They like it even better when pilots have maintenance logs, operating manuals, and a record of parts or add-ons they’ve bought. When pilots have these items and proof of training or of planning to get trained, insurance agents consider them to be safer pilots.

This lowers the amount of risk you pose to your drone , inanimate objects, animals, other people and most importantly to the agents, to the company’s loss. The safer and more prepared you are, the easier it is for you to get insurance at lower premiums (similar to car insurance).

It is mandatory for the commercial drone pilots to insure their drones. However, drone insurance should also be seriously considered even when flying a drone for fun.

Below you can see a list of potential uses (operations) a company could insure you for:

  • News Gathering
  • Real Estate
  • National Parks and Recreation
  • Movies and Videography
  • Highway and Railroad Maintenance
  • Geology and Archaeology Exploration
  • Maritime and Shipping
  • Pipeline/Hydro-Transmission Line Inspection
  • Construction
  • Facilities Protection: Nuclear, Electrical, and Water Sites
  • Corrections Facility Security
  • Agriculture and Conservation
  • Traffic Patrol and Accident Assistance
  • Homeland Security
  • Fire and Rescue
  • Law Enforcement and SWAT
  • Emergency Response (FEMA)

Source: Unmanned Risk Management

 

Accident and Liability Coverage

A wide range of different drone insurance packages is offered by insurance companies. These packages offer different levels of cover. Most insurance policies for drones include liability and loss cover, for example should your drone become damaged accidentally while in storage or flight, then the insurance policies should provide money for replacement or repairs.

Drone insurance also protects your liability. If your drone gets in the way of a plane, or crashes into the building you were trying to film, it can cause a lot of damage. Drone insurance can protect your personal liability, which means that should any damage be caused by your drone, then the insurance will pay out to repair the damage caused. Public liability cover is designed to protect your business in the event that a member of the public is injured, or their property is damaged, and it is one of the main reasons all businesses that use drones commercially really need to take out insurance policies.

Here is a list of some potential accidents that certain drone insurance policies cover:

  • Damage to Premises You Rent
  • Your Property and Office/Studio Contents
  • Fellow Employee Coverage
  • War, Terrorism, and Hi-Jacking
  • Advertising Liability
  • Contractual Liability
  • Independent Contractors Liability
  • Personal Injury
  • Aviation and Premises Medical Payments
  • Fire Legal Liability
  • Third Party Legal Liability
  • Premises Liability
  • Coverage for drone pilots, including other non-pilot, on-ground crew
  • Manufacturer Product Liability
  • Damage or loss to the UAV and associated equipment

Sources:

 

What Types of Coverage Are Available?

  1. Personal Injury

Personal Injury coverage is for libel, slander, violation of privacy, and copyright infringement, but the most important portion of this coverage is the violation of privacy language. This type of coverage is a relatively new offering in the drone insurance world. With the population’s irrational fear of flying cameras, and the negative portrayal of UAS in the media, it is a good idea to consider this type of coverage.

  1. Hull

Hull insurance is one of the main types of drone insurance policies, and its purpose is protecting the business from the financial cost from any Physical Damage that may occur to its UAV(s). Typically, hull coverage is quoted on an “Agreed Value” basis, which means that the insurance company, business owner, and their broker will agree upon a value and quote the UAV based on that valuation. However, it’s very important to make sure that the stated value is in line with the current market price of your UAV.

If a drone was bought for $1,500 in early 2015, the market value is most likely not the same at the end of 2017. Not keeping up with the declining value of UAVs will lead to overpaying for insurance, and issues in the claims process. If your drone is completely destroyed, the insurance company will cut you a check for the insured value of your drone minus any applicable deductibles. It is important to note that deductibles on a drone policy are usually between 5% and 10% of the insured value of the craft depending on the insurance policy.

However, some companies will adjust the value of the drone to reflect the current market price. For example, you cannot insure a DJI Phantom 3 for $6,000 and expect to get that amount in the event of a claim. This is another reason why it is important to make sure that the value of your drone is accurate.

  1. Liability

In drone insurance, the base policy is liability only, and this coverage must be bought prior to adding any other type of coverage.

It is often argued that liability is the biggest concern of any business, especially one that operates drone, so you should think about liability coverage like the foundation of the drone insurance policy. The purpose of liability coverage is to protect the insured against claims for damage to another person’s property or bodily injury to another person. Typically, liability limits begin at $500,000. However, they can be negotiated to as high as is required by the business and its clients (limits as high as $10,000,000 per occurrence are not unheard of in drone insurance).

It is, however, important to note that each insurance company may or may not offer you certain limits based on their underwriting criteria.

  1. Payload

Payload coverage is very important if your drone will be carrying cameras, sensors, or other valuable equipment. Like hull coverage, it insures against physical damage. However, payload insurance protects the insured when the scheduled payload onboard the drone is destroyed or damaged. It is important to note that a similar deductible of between 5% and 10% of the insured value of the equipment will be applied to payload items.

For payload coverage, an insured does not simply want to “lump” the value of the payload in with the hull coverage on the drone. These items should be scheduled on your insurance policy separately. It is very important to accurately insure the value of the payload. Here is an example of how the scheduling should look on the quote/binder/policy:

Drone Schedule

  • 2017 DJI Zenmuse X5R – S/N 0DDF2345697 – $3,199 (Insured Value)
  • 2017 DJI Zenmuse X5S – S/N 0DDP4987321 – $1,899 (Insured Value)
  • 2017 DJI Inspire 2 – S/N 0DDX091356F9 – $3,000 (Insured Value)
  1. Non-Owned Coverage

There are a couple of types of this type of coverage that can be added to a drone insurance policy. The first is Non-Owned UAV Liability coverage, which is designed for a business that operates UAVs that are not owned, or leased for a significant amount of time, by the Named Insured. Non-Owned UAV Liability coverage will protect the business from any claims of Bodily Injury or Property Damage that may arise from their use of a Non-Owned UAV. However, it will not protect the business from physical damage to the non-owned UAV itself. If this type of coverage is added to a drone insurance policy, it usually follows the liability limit of the owned craft. If a business is ever asked to operate a drone that somebody else owns, then Non-Owned Liability coverage is definitely something for them to consider.

Non-Owned UAV Hull coverage is the second Non-Owned UAV coverage to consider. This coverage is coverage for Physical Damage to the non-owned UAV(s) operated by the Named Insured. The Named Insured typically chooses a limit for this type of coverage. So, if a Named Insured generally operates a 2017 DJI Inspire 2 that carries a DJI Zenmuse X5S Camera, that is not owned by that Named Insured, they should consider adding Non-Owned Hull coverage in the amount of $4,899 ($1,899 for the DJI Zenmuse X5S Camera and $3,000 for the DJI Inspire 2).

Non-Owned Payload coverage is the third Non-Owned coverage to consider. Non-Owned Payload coverage is a must if a Named Insured operates an Owned 2016 Freefly Alta, and commonly carries RED cinematic cameras owned by the production companies that hire them because these cameras, equipped with certain lenses, can sometimes be valued around $100,000! This type of coverage is also crucial if a Named Insured uses expensive sensors not owned by that Named Insured to perform aerial inspections. Some insurance companies add this coverage on a case by case basis, and in that situation, the Named Insured will allow you to set a coverage limit and add a “blanket” endorsement to the policy.

  1. Ground Equipment

Ground equipment such as remote controllers, UAV cases, tablets, laptops, dedicated ground stations, and other items associated with an insured UAV can also be added to insurance policies. It is important to note that similar rates and deductibles to the payload and hull coverage should apply to the ground equipment.

 

How Much Is Drone Insurance?

The cost of drone insurance will vary greatly upon your own experience and the company that you are seeking to be insured by.

Drone insurance policies are usually broken up into two parts – Liability and Hull damage.

  • Liability covers you if your drone causes injury or damage to third parties.
  • Hull damage will take care of your UAV.

A commercial insurance policy for a Yuneec Typhoon H  or DJI Phantom 4 covering liability up to $1 million can run as little as $600-$800 a year (depending on background, experience, and volume).

Or you can get $1 million in liability for as little as $10/hour if you use a company like Verifly , an on-demand drone insurance company.

It is important to note that these are general numbers from our research. If you want to know exactly how much you will be covered and what it will cost, you will need a unique quote from an insurance company.

Each company structures their policies a little differently, and not every drone insurance policy includes both liability and hull coverage.

There’s no way to predict exactly the price you’re going to receive from an insurance company, which means that you’ll need to do a lot of due diligence here and chat with a number of companies before moving forward.

If you are planning to get drone insurance, you may want to start considering the things that the insurance broker may look at:

  • Have you logged an ample amount of flight time (50-100 hours?)
  • Do you have an updated maintenance log?
  • Are you an FAA-licensed drone pilot ?
  • Are you registered?
  • Do you own or rent your drone or equipment?
  • Are you able to automatically record your flight log?
  • How does your website / marketing materials look like? (Is your website professional? Do you have good reviews?, etc.)
  • Are you flying near people, over water, or operating indoors?
  • Have you taken some kind of drone pilot training ?

 

How to Get Drone Insurance?

To get insured, you will most likely want to begin by getting quotes from several companies and then decide which one you want to go with.

To obtain an insurance quote, go to the various different websites, find the “get a quote” form, and fill it out.

Here’s some info they might ask:

  • Personal information about you, including your address, social security number, contact information, etc.
  • The type of coverage you want (liability and/or hull coverage)
  • The type of equipment you have
  • The cost of each part of your drone, including equipment
  • An overview of the type of gear you need insured
  • How many hours you’ve spent flying drones
  • How much training you’ve had
  • Where you’re planning to operate the drone
  • If you have any record of loss, accidents or damages
  • If you have a FAA 333 Exemption grant or other country-equivalent certification paperwork

If you want to see what information a company might ask you for in the consultation stage, check out this form from Aviation Insurance.

You can also download Verifly’s app and get a quote from them for on-demand coverage.

Once you’ve obtained multiple quotes, you can compare coverage and prices, and this will help you decide which company is offering the best deal.

Once you have decided what insurance company to go with, they’ll guide you through the rest of the procedure.

Can you lose your drone insurance?

Of course. You can lose drone insurance coverage by being careless and irresponsible. Here are a few reasons why you might lose your insurance. Every provider has its own exclusions. It’s very important to understand what they are.

Here are some of them:

  • Not logging your flight data – This is important because the insurance companies want you to manage your hours so they know how much the drone is being used (especially if you have a policy that charges you by your flight time).
  • Not being able to prove what happened during an accident with flight log data.
  • Not registering your serial number or put the proper identification on the drone itself.
  • Not logging all maintenance changes (even propeller changes) – It’s hard for the provider to trust the pilot when something has failed and requires compensation if pilots fail to log their maintenance issues and work done on the drone.
  • Not logging all battery cycles.
  • Not flying safely, and uploading dumb videos to YouTube that proves it!

So long as the pilot practices safe flying, adheres to the FAA rules, manages his drone (logs flights and maintenance), and, of course, pays the insurance premium, there’s no reason for his insurance to be cancelled.

 

Companies That Offer Drone Insurance

Below you’ll see a list of different companies which offer drone, UAV, UAS, and quadcopter insurance coverage.

It is important to note that an AMA (Academy of Model Aeronautics) membership does not cover commercial flights. Be wary of this. You might run into some serious problems down the road if you think you’re covered through that and you are generating income with your drone.

Here’s a list of several US-based drone insurance brokers that can help you find the best drone insurance policy for you and your business. Some of the companies listed are very specific to the drone industry, while others offer more diverse business products to their clients.

List of Drone Insurance Brokers

List of Drone Insurance Underwriters

The people over at ArcadiaSky maintain a separate list of insurance providers outside of the U.S, particularly drone insurance in the U.K. and in Australia.

Look up the insurance companies mentioned, request a quote, and do some research on the provider and the coverage it provides. Remember, doing a proper research is extremely important here. Depending on how many hours you fly a year, and what you use your drone for, there are insurance policies that will tailor your coverage perfectly and others that won’t be worth it at all.

 

Process of Filing an Insurance Claim

You might not need to file a claim right now. However, if you do end up filing one, it’s good to know what might be required.

Here’s a general outline for filing claim from Unmanned Risk Management:

  • Policy documents – Read carefully over your insurance policyfor specific duties to accomplish. This will tell you about all the allowances and restrictions as stated by your insurer.
  • Notification – It’s very important to notify the insurance company as soon as possible. You must note the place, time, description of the occurrence, names and contact information for any injured people and witnesses, including all passengers. Immediately forward copies of any legal papers, summonses, notices, and demands received in conjunction with an occurrence.
  • Authorities – One major step is to notify the proper authorities.Immediately contact the police for vandalism or theft claims.
  • Be wise – Do not make any statements (written or oral) without the permission of insurance company. You cannot hinder the insurance company’s ability to seek reimbursement for damages from responsible parties. That’s why it’s very important to not assume any obligation, liability, offer or pay reward or make any payment, except for necessary first aid or to immediately protect property from further damage.
  • Post-accident Precautions – Do not abandon your drone or insured property after the incident. Take all reasonable precautions to protect your property immediately after the occurrence of an accident.
  • Co-operation – Cooperate with the insurance company and their representative(s) to the utmost level possible. Such things as regular communication with the adjustor, helping obtain and give evidence, answering questions about the occurrence under oath, getting witnesses to testify, and attending hearings and trials are all generally expected.
  • Allow Inspection – The insurance company must be allowed to inspect and examine the damaged property prior to repair or disposal.
  • Documentation – The insurance company must be sent all sorts of possible proofs of loss within a set amount of time. This is usually a sworn statement setting forth the interest of the Named Insured and of all others in the property affected, any encumbrances, the description and amounts of all other insurance covering such property, the value of the property at the time of the loss, and the cause, time, place, and amount of such loss.

 

Conclusion

There you have it. Hopefully at this point, you can see the value and importance of insurance if you’re using your drone to generate income. Hopefully this guide has given you everything you need to understand drone insurance. Now all that’s left is to do some research, fill out the appropriate paperwork, receive some quotes, and decide which insurance company is best for you. Remember, it’s very important to be a responsible pilot, because safe flying is the only flying. However, it’s also very important to make sure you’re covered for a variety of situations. Insurance offers that peace of mind to you and your client. It also guarantees your protection, and it can save your business if you’re flying commercially. The essence of free and safe flying can only be received when you are carefree about the future.

Remember, if you’re only flying recreationally, you might be covered by your homeowner’s insurance. However, make sure to confirm this before continuing to fly.

 

 

 

 

 

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