Pilot Life Insurance — The State of the Industry
Has it been a while since your last life insurance review? Does your life insurance policy have an exception for an accident in a small plane? AVweb's Kevin Lane-Cummings reports that changes in the live insurance industry make now a good time to update that policy.
Increased security, increased perception of risk, increased litigation -- the aviation insurance industry has had a lot of challenges recently, and most of us have seen the effects of those challenges when we paid our severely increased insurance premiums. But those premiums are for hull and liability (and sometimes medical) insurance -- what about life insurance? What are the changes in that industry?
We all know about the added costs of flying, both financial and operational, due to the effects of 9/11. And on the insurance end, liability premiums shot through the roof and coverage for "acts of war" became more restrictive (or nonexistent).
The life insurance industry, though, didn't change as substantially, except in certain, specific coverages. For instance, most carriers will no longer offer insurance coverage to pilots if they are operating in an "unstable" country. For pilots flying in North America, this isn't much of an issue. But consider those wonderful pilots who fly for missionary or relief work in many countries around the world. The danger of terrorism, as well as the reduced safety of going into mountain/jungle/desert airstrips in remote areas, has made such pilots too high a risk for most insurance carriers. These pilots now have difficulty getting coverage at any price. Coverage for military aviation personnel who are available for deployment overseas is also more expensive and often difficult to get.
Other than these specific pilots, most changes in the life insurance industry were more subtle. The buzz immediately after 9/11 was that, in the overall downturn in the aviation industry, fewer pilots would initiate or renew their life insurance. Or perhaps fears of war and terrorism would drive more pilots to purchase policies as they considered their own mortality. Nothing so dramatic happened. Instead, there seems to be a slow rise in the number of pilots getting new or updated policies to ensure they are covered if there is an aviation fatality. This seems to be due more to the availability of pilot-centered life insurance rather than effects of 9/11.
Pilot-Centered Life Insurance
The most significant change in life insurance for pilots over the last few years doesn't have anything to do with terrorism or the threat of war or even the increase in liability awards. Increased competition among insurance carriers means some companies are looking more closely at the nature of the flying that their insured pilots are doing.
In the past, most of the life insurance industry didn't distinguish to any great degree among types of flying. They tended to lump all pilots into the same risk pool: commuter pilots, weekend warriors and agricultural application pilots were considered part of the same risk group. Also, many carriers previously excluded a death caused in a GA accident, and many pilots were unaware that they did not have coverage for this type of accident. Either the insurance agent didnít mention it, or the pilot, fearing higher rates, didnít mention their flying to the agent.
Recently, by splitting pilots into different categories based on the type of flying they do, life insurance companies have reduced premiums for most of us "weekend warriors." Obviously, this means that pilots in more risky aviation endeavors may be paying more, but some insurance carriers are now understanding these differences.
Insurance companies know that people with higher incomes and higher education have a lower mortality rate. Exactly why thatís true is unclear (perhaps greater income and education come with better health care and less physically demanding jobs), but it is certainly true that, as a group, pilots have higher education and higher incomes than average. Also, the aviation medical examination ensures that pilots are in better physical shape than many non-pilots, both because it may reveal a risk factor (such as heart disease discovered by an EKG) and because pilots are more likely to get preventative medical care so as to keep their aviation medical certificate. Specialized agents will know the companies that do factor pilot health into their quest for low-cost life insurance.
Some insurance carriers can also reduce premiums by taking advantage of another pilot quirk: Pilots tend to stay with one policy longer than do non-pilots. Randy Williams of Pilot Insurance Center (PIC) of Dallas notes that over a five-year period, upward of 95% of pilots don't change their policy, while a large percentage of non-pilots shop for a new policy more often. Why does this affect premiums? Less turnover means fewer commissions need to be built into the premium structure. (This may change if more pilots realize they can get a better rate by checking out new policies.)
Pilot-Savvy Insurance Agents
Some insurance carriers now have sophisticated analyses that let them price life insurance based on very specific pilot situations, such as type of certificate, frequency of flying, age, etc. And more importantly, each carrier has different ways of evaluating that risk. For instance, a pilot may find one carrier is less expensive when they are a student, and a different carrier is better once they've been flying a while and have another certificate or two. Age factors are also different with each carrier -- a 25-year-old student pilot could get a good rate from one carrier, while a 55-year-old student pilot should go with another; on the other hand, the first carrier may give a better policy once that 55-year-old gets a private pilot certificate. The various scenarios for pilots apparently change quite often as different carriers evaluate their underwriting guidelines and risk histories.
An insurance agent well-versed in the differences between pilot certificates and ratings, different aircraft, and different types of flying can find the best rate for a particular pilot. For instance, there's a statistically significant mortality difference between a very popular and well-designed experimental, like a Vans RV, and a one-of-a-kind amateur-designed airplane. At PIC, all the agents are pilots, and each summer, the PIC agents and some of their underwriters visit EAA's AirVenture at Oshkosh to learn about the differences between aircraft.
In an ironic twist, for very few pilots it may be better to go with an insurance agent who is not so pilot-savvy. In a lesson that speaks well for shopping around, Randy Williams tells of a pilot who compared quotes between PIC and another agency. The pilot told both agencies that he was an active, commercial-certificate pilot. The other agency gave a quote based only on that brief information. PIC asked for more specifics, as they always do. Turns out the pilot flew fire-suppression, sadly a high-risk activity, and PIC had to quote a higher premium. After confirming that the other policy didn't have some fine print exempting the insurance carrier from paying if the pilot died while engaged in fire-suppression, Randy concurred that the pilot should go with the lower premium. The other agency was unwittingly taking on added risk without charging him for it.
In the end, taking some time to check with various insurance agencies -- especially those that understand pilots and flying -- and reading the fine print can save hundreds of dollars a year on life insurance premiums. And even though those online insurance-premium calculators are too simplistic to help you get a good policy and rate, that doesn't mean comparison shopping takes time. Phone calls to a few companies like PIC are usually all it takes to get a quote that accounts for your specific needs and flying situation.