When financing an aircraft, lenders will require full “in-motion” and “not in-motion” insurance coverage
for both the hull value and liability for the duration of the loan until paid off. Aircraft owners have the
option of purchasing insurance through specialty aircraft insurance brokers or through a very limited
number of direct underwriters. Aircraft insurance brokers give owners more options on coverages,
deductibles, and premiums versus direct underwriters as the “shop the market” to actual indirect
In general, most aircraft lenders will require low deductibles and policy requirements notifying the
lender with a 30-day cancellation notice along with a 90% Breach of Warranty (BOW) clause. The BOW
basically guarantees the lender payment from any insurance proceeds in the event of claims where the
aircraft owners violated covenant(s) and terms as outlined within their policies. If a claim is filed where
a BOW is required, the underwriting insurance company can subrogate the amount as a claim against
the actual insured.
Most airplane insurance liability coverage starts at a total of one million dollars and higher amounts are
available upon request. Students, low-time pilots, and those inexperienced in higher performance
aircraft can limit liability coverage to $100,000 per passenger. The additional premium cost to upgrade
to a combined single limit “smooth” liability provision will be determined by the insurance underwriter
based on experience levels of the insured. Lenders generally do not specify what level of liability
coverage would be required but pilots may want to see if they qualify for the higher combined single
limit for liability purposes.
Typically with any collateral based loan transaction, aircraft lenders would place more costly force
placed aircraft hull and liability coverage in the event borrowers do not have the proper and required
insurance policy in place at all times.
Banterra Aircraft Finance offers financing solutions for both general aviation and business aircraft for
purchases, refinancing, engine overhauls, and avionics upgrades. Visit www.BanterraAircraft.com or call