Part of the requirement for financing an aircraft is having sufficient insurance. That includes hull coverage for when the airplane is in motion and not in motion. Typically, lenders are looking at hull coverage to be at least equal to the loan amount. In some cases that may be equal to the purchase price. Adequate insurance also includes liability coverage.
Because it’s a requirement for obtaining an aircraft loan, it’s important to reach out to aviation insurance companies early in the process. By letting them know what your pilot experience and qualifications are, and what type of airplane you intend to buy, you can get an accurate indication of the range in pricing facing you. Insurers look very closely at pilot qualifications, total flight hours, and currency, as well as flight history.
There are some instances—like too little experience and too complex an airplane—where the insurance premium or deductible will be cost-prohibitive. Worse still, the combination of pilot inexperience and airplane complexity could result in the insurance company declining to write a policy.
In other words, you’ve been wanting a Mooney, Bonanza, or a Cirrus—and you intend for this airplane to be the first and last airplane you’ll ever own—if you're financing, maybe consider a different option. Consider starting with a fixed-gear aircraft, something that's not complex, not high-performance. Then you can build up your experience and eventually upgrade to a more complex airplane.
Without insurance, there is no financing. If there is any concern as to whether you can be insured, check with insurance companies before you start making promises to sellers, and before you start gathering financial information on yourself. There’s no point in negotiating a deal or going through the exercise of assembling financial forms if it turns out you’re currently uninsurable.
Regarding the deductible, lenders tend to set limits on how much the deductible can be. In most cases, that figure is based on a percentage of the value of the aircraft. Lenders tend to ask for deductibles in the range of 2% to 4% of the agreed-upon value of the aircraft. Note that deductible limits are based on the agreed-upon value of the airplane, not its purchase price. And the airplane’s value is what the insurance company says it is, which may be more than the purchase price.
Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
