If you own a drone or you’re thinking about building and managing a drone program, a drone insurance policy should feature among your top priorities. Here’s all you need to know about securing yourself with drone insurance.
The rules, laws, and regulations applicable to commercial drone use are still evolving. But with drone technology increasingly becoming more sophisticated and powerful, the need to protect this valuable investment is also more apparent than ever.
Professional drone pilots are prudent. They manage risk through extensive planning. They become mission-ready by doing practice runs and field exercises. But an accident, by definition, means an unfortunate incident that happens unexpectedly and unintentionally.
No amount of forward-thinking and preparation can protect your organization and assets from the potential liability risks coming your way if things were to go wrong. Your drone could crash. Worse still, it could crash into someone or on their property. In cases like these, having the right drone insurance can make all the difference.
If you find the topic of drone insurance complicated, or even stressful, you are not alone. Unmanned aerial vehicles are new territory for most of us. And it’s not exactly helpful that drones are classified as a type of aircraft. Or that the potential risks arising from them are both unusual and complex.
This definitive guide on drone insurance has been built keeping all this and more in mind. But before we take a deep dive into the topic, you may want to familiarize yourself with some key insurance terms:
Why do I need drone insurance?
Would you drive your car without automobile insurance? You need drone insurance because it’s the smart thing to do.
You may already have a homeowners’ policy or a business liability insurance, but most insurance providers do not cover the use of a drone for commercial use. Since a drone is classified as aircraft, any mishap arising from their commercial or recreational use is beyond the scope of a general liability policy. This exclusion exposes you to the risk of third-party bodily injury, personal injury, or property damage claims.
Therefore, if you would like to use drones commercially, it is essential to first get your policy reviewed by your agent. If there is an aircraft exclusion clause in your policy, it would be easy to spot since exclusions are listed in alphabetical order. If you do not see any mention of drone coverage in your policy, it’s safe to assume you will be taking to the skies unprotected.
Let’s not do that.
Flying insured is the greatest hallmark of a responsible drone operator. And responsibility is key for any organization hoping to build and manage its own drone program.
Accidents can and do happen. Bodily injury or property damage to third parties can and do happen. But with proper drone insurance, just like any other liability insurance, the burden of paying for the damages will not fall on you alone.
Having a drone insurance policy guarantees peace of mind not only for you but for all your stakeholders. It is a reflection of your professionalism as a drone operator.
What will my drone insurance cover?
Broadly, there are two types of drone insurance: hull insurance and liability insurance. Enterprise drone users should have both.
Hull insurance: If your drone gets harmed beyond simple cosmetic damage, hull coverage will cover it. Depending on your policy and provider, hull insurance will also safeguard your drone against loss or theft. The hull premium is based on the value of the drone and its equipment, including cameras and sensors.
Liability insurance: The bedrock of all drone insurance policies, liability insurance covers third-party incidents such as bodily injury or property damage. A typical drone insurance policy will provide you $1 million in coverage. But it is not uncommon to see larger firms demand higher limits of standard minimum liability (around $2.5 million) when more risk is involved.
Liability insurance also covers personal and advertising injury, wherein a third-party may say it has incurred harm, other than bodily injury, because of your actions. Think nuisance or trespass-related litigation resulting from invasion of privacy claims.
How much does drone insurance cost?
Insurance in the drone industry works on the lines of insurance in any other industry – the pricing can vary greatly based on the unique needs of the organization or the drone pilot. This pricing is a direct reflection of the risk involved.
It is not uncommon to see hull insurance premiums go up over time or watch liability premiums decrease after a consecutive period of coverage without incidents or claims. The pricing pattern reflects the frequency of hull claims compared to liability claims, with insurers gaining more loss history in this ever-evolving field.
The evolution of the drone industry is also leading to innovations in the field of insurance. On-demand insurance providers today offer policies by the hour, monthly, or annually. Drone insurance can cost as low as $5/hour or go up to $1,000 year, based on the time frame and liability limit. The insurance liability limit can range anywhere between $0.5 million and $10 million.
So, before zeroing down on a drone insurance policy or deciding what liability limit you need to set, ask yourself:
- What are the potential risks associated with my mission and my client’s coverage demand?
- Do I need the coverage per project, seasonally or all year round?
- Do I need to top up my policy with hull coverage?
Generally, the hull insurance premium is calculated using a percentage of the insured value of the drone. For example, if a drone with a $1,000 insured value has a 10% annual rate, the premium cost would be $100. It should also be noted that deductibles are common on hull insurance but not for liability insurance.
Keep all these factors in mind as you explore quotes and evaluate drone insurance providers.
What is the proof of purchase of drone insurance?
If you are ready to reach out to a drone insurance provider, ascertain that they will provide you with a Certificate of Insurance (COI) as well as a policy document. The COI includes the policyholder’s full name, the policy period, policy number liability limit, and the additional insured (if any).
If you are working with a client, you will likely get asked to show the COI. Chances are, many will request to be listed as additional insured to your policy – which you can make happen easily by working with your agent.
This is an adaptation of an article by Skywatch.ai, a leading provider of drone insurance, you can read the original or learn more about drone insurance here.