Fractional aircraft ownership offers the benefits of private jet use without the full cost of owning an aircraft outright. However, there are several specific risks associated with this model:
Understanding these risks and conducting thorough due diligence before entering into a fractional ownership agreement is crucial. Prospective owners should carefully review all contractual terms, assess the reputation and reliability of the management company, and consider their own travel needs and financial situation before committing.
Insurance for fractional aircraft is designed to cover the unique risks associated with fractional ownership of an aircraft. It provides a range of protections to fractional share owners, addressing potential liabilities and financial losses. Here’s how it works and the protections it offers:
Hull Insurance
Physical Damage: Covers damage to the aircraft itself, whether it occurs on the ground or in the air. This includes coverage for repair costs or replacement in case of a total loss.
Depreciation Protection: Some policies include coverage for the depreciation of the aircraft’s value following a significant repair.
Liability Insurance
Third-Party Liability: Protects the fractional owners against claims from third parties for bodily injury or property damage caused by the operation of the aircraft.
Passenger Liability: Covers claims from passengers aboard the aircraft who may suffer injuries during a flight.
Loss of Use Insurance
Compensates for the loss of use of the aircraft if it is damaged and undergoing repairs, helping to cover the cost of alternative travel arrangements.
War and Terrorism Coverage
Provides protection against risks associated with war, hijacking, terrorism, and other related perils that are typically excluded from standard policies.
Risk Mitigation:
Financial Protection: Ensures that fractional program members are not personally liable for large financial losses due to damage to the aircraft or third-party claims.
Comprehensive Coverage: Includes a broad range of potential risks, providing peace of mind that many unexpected events are covered.
Legal Defense:
Legal Fees and Costs: Covers legal defense costs in case of lawsuits arising from the operation of the aircraft, reducing the financial burden on fractional owners.
Shared Liability:
Joint Ownership Structure: Since fractional ownership involves multiple parties, insurance helps distribute and mitigate the individual liability of each owner.
Management Company Coverage: The management company typically holds the insurance policy, ensuring that all fractional owners are covered under a single, comprehensive plan.
Operational Continuity:
Loss of Use: Helps ensure continuity of operations by covering the costs of alternative travel if the aircraft is unavailable due to damage or maintenance.
Service Providers: Insurance often extends to cover service providers like pilots and maintenance crews, protecting against potential claims related to their actions.
Policy Limits: Ensure that the insurance policy has adequate limits to cover the value of the aircraft and potential liabilities.
Exclusions and Conditions: Review the policy for any exclusions or specific conditions that might affect coverage, such as geographic limitations or specific operational requirements.
Management Company Role: Verify that the management company maintains robust insurance coverage and that fractional owners are listed as additional insureds on the policy.
Overall, fractional aircraft insurance provides critical protection for fractional share owners, ensuring that they are safeguarded against significant financial losses and liabilities arising from their aircraft ownership and usage.
Fractional aircraft owners insurance offers several benefits, providing essential protections and peace of mind for those who own a share in a private aircraft. If the aircraft is unavailable due to damage or maintenance, the insurance can cover the costs of alternative travel arrangements or chartering another aircraft.
In the event of a lawsuit related to the aircraft, the insurance covers legal defense costs, which can be substantial. Insurance can cover settlements or judgments awarded in legal cases, reducing personal financial exposure.
If an incident takes the aircraft out of service, insurance coverage for loss of use helps maintain continuity of travel plans with minimal disruption. Policies often extend coverage to pilots and maintenance crews, ensuring that their actions are covered, which supports uninterrupted operations.
Owners can enjoy the benefits of private aviation without the stress of bearing the full brunt of potential risks and liabilities. Knowing that a wide range of risks are covered allows owners to plan and travel with greater confidence.
Fractional aircraft owners and participants in private jet programs still need non-owned aircraft liability insurance, despite the coverage provided by their respective programs.
Non-owned aircraft liability insurance provides coverage for liability arising from the use of aircraft that the insured does not own. This type of insurance typically covers:
Bodily Injury and Property Damage: Liability for bodily injury to passengers and third parties, as well as damage to third-party property.
Legal Defense Costs: Expenses associated with defending against lawsuits arising from the operation of non-owned aircraft.
Personal Liability Protection:
Supplemental Coverage: While the management company or operator’s insurance policy covers the aircraft and general liability, individual fractional owners or jet card members might still face personal liability. Non-owned aircraft liability insurance provides an additional layer of protection for these individuals.
Comprehensive Risk Management: This insurance ensures that any gaps in coverage are filled, offering peace of mind to the aircraft users.
Coverage for Personal Use of Other Aircraft:
Varied Usage Scenarios: Fractional owners and jet card members might occasionally use other aircraft outside their primary program. Non-owned aircraft liability insurance covers liabilities arising from the use of any aircraft they do not own, which is particularly useful in such cases.
Broader Applicability: This insurance applies regardless of the specific aircraft being used, ensuring continuous coverage across different flying situations.
Legal Requirements and Best Practices:
Regulatory Compliance: In some jurisdictions or under certain circumstances, additional liability insurance might be required by law or contract.
Industry Best Practices: Aviation experts often recommend having non-owned aircraft liability insurance as a best practice for comprehensive risk management.
Non-owned aircraft liability insurance is an essential component of comprehensive risk management for fractional aircraft owners and private jet program members.This supplemental coverage addresses potential gaps, enhances personal liability protection, and aligns with legal and best practice recommendations in the aviation industry.
Fractional share aircraft owners who require additional coverage may look into insurers carrying supplemental coverage in addition to the standard insurance coverage offered by their partners. These supplementary and additional coverage options to enhance their protection and address specific needs beyond the standard insurance provided by their fractional jet ownership program:
Excess Coverage Liability Insurance
Personal Effects Coverage
Loss of License Insurance
Emergency Medical and Evacuation Insurance
War and Terrorism Coverage
Kidnap and Ransom Insurance
Non-Owned Hull Coverage
Future Products Liability
CAI helps aircraft owners, large fractional companies, and large fleet managers find insurance policies that cover their needs. From individual owners’ private jets to commercial aircraft operators, our clients face unique risks and perils in the industry. Whether you’re a charter company owner, aircraft operator, or a fractional operator with multiple aircraft, our experts will be here to guide you.
