Why You Should Never Overinsure or Underinsure Your Aircraft

Caleb Winterburn
Jul 8
4 min read

One of the most common questions I receive is:

"What value should I insure my aircraft for?"

It's a great question because getting the answer wrong can cost you tens or even hundreds of thousands of dollars.

Some aircraft owners intentionally insure their aircraft for less than it's worth to save on premium. Others think that if they insure it for more than it's worth, they'll receive a larger payout after a total loss.

Unfortunately, both approaches can backfire.

After more than 15 years in aviation insurance and reviewing over 22,000 aircraft policies, I've seen both situations create major problems for aircraft owners.

The goal isn't to buy the cheapest insurance or insure your aircraft for the highest value possible.

The goal is to insure your aircraft for its true market value.

The Risks of Underinsuring Your Aircraft

Let's say your aircraft has a market value of approximately $100,000.

To save money, you insure it for only $20,000.

At renewal, that might save you a few hundred dollars.

It doesn't seem like a big deal until something happens.

Imagine you experience a propeller strike that results in substantial engine damage. After the claim is investigated, the aircraft is determined to be a total loss.

Because you chose an agreed value of only $20,000, the maximum amount payable is generally limited to that insured value, subject to the terms and conditions of your policy. In many cases, the insurer will also retain the salvage.

You didn't save $80,000.

You lost it.

Trying to save a small amount on premium can become one of the most expensive financial decisions an aircraft owner ever makes.

The Risks of Overinsuring Your Aircraft

Now let's look at the opposite situation.

Your aircraft is realistically worth about $100,000.

Instead, you insure it for $200,000.

Many people assume that if the aircraft is destroyed, they'll simply receive a cheque for $200,000.

That's usually not how aircraft insurance works.

If an aircraft is insured for significantly more than its actual market value, the insurer may have a greater incentive to repair the aircraft whenever it is economically reasonable under the policy rather than declaring it a total loss.

Instead of replacing your aircraft quickly, you could spend months waiting while repairs are completed.

You may also be paying premium every year on a value that doesn't accurately reflect what your aircraft is worth.

More insurance isn't always better insurance.

Accurate insurance is better insurance.

Aircraft Values Change

The aircraft market changes constantly.

An aircraft that was worth $100,000 three years ago may now be worth $140,000.

Likewise, market values can decline.

Many owners insure their aircraft based on what they paid years ago and never review the value again.

That can leave them either underinsured or overinsured without realizing it.

Your insured value should be reviewed at every renewal.

How Do You Determine the Right Value?

The best starting point is the aircraft's current fair market value.

That includes considering:

Aircraft make and model

Engine time

Propeller time

Avionics upgrades

Paint and interior condition

Modifications

Comparable aircraft currently selling in Canada

Recent market trends

No two aircraft are exactly alike.

Even two aircraft of the same year and model can have significantly different values.

Insurance Is More Than Just Price

When shopping for aircraft insurance, many owners compare only one number.

The premium.

But that's only one part of the policy.

A proper review should also include:

The insured hull value

Liability limits

Deductibles

Approved pilots

Aircraft configuration such as wheels, floats, amphibs or skis

Geographical limits

Additional coverages such as emergency expenses, salvage, forced landing recovery and spare parts

The cheapest policy isn't always the least expensive.

If the coverage doesn't properly protect your investment, it can become the most expensive policy you've ever purchased.

The Bottom Line

Your aircraft represents years of hard work, training and financial investment.

Don't guess at its value.

Don't insure it for less simply to save premium.

Don't insure it for more hoping for a larger payout.

Insure it for what it's actually worth today.

That simple decision could save you thousands of dollars and a tremendous amount of frustration if you ever need to file a claim.

If you're unsure whether your aircraft is properly insured, I'd be happy to review your current policy and discuss whether your insured value still reflects today's market.

Sometimes a short conversation today can prevent a very expensive surprise tomorrow.

Clear skies and safe flying.

About the Author

Caleb Winterburn is a Commercial Airplane Pilot, Commercial Helicopter Pilot and Vice President of Aviation Insurance at Covalen. With more than 15 years of aviation insurance experience and over 22,000 aircraft policies reviewed, Caleb specializes in helping Canadian aircraft owners, flight schools, flying clubs, maintenance organizations and aviation businesses protect their aircraft with insurance solutions tailored to how they actually fly.

Through educational articles, videos, seminars and online tools, his mission is to help pilots better understand aircraft insurance before they ever have to make a claim.

Learn more at: https://calebwinterburn.ca⁠�

Need an Aircraft Insurance Quote?

Whether you're buying your first aircraft, renewing your current policy or simply looking for a second opinion, the aviation team at Covalen is here to help.

Request your personalized aircraft insurance quote today:

https://covalen.ca/en/aviation-insurance⁠�

Every aircraft is different. Every pilot is different. Your insurance should reflect that.