Photo via Foter.com
The drone industry continues to advance, and while many feel the insurance industry is always a step behind, technology is helping to bridge the gap.
In this article I asked Evan “The Drone Insurance Guy” Garmon to clarify the difference between on-demand and annual insurance policies and when each should be used.
Note that I am not providing insurance advice and you should consult your insurance agent for your specific needs. Evan has specialized in insurance for drone operators and so you should consider him as a resource when trying to sort out your options.
On-demand drone insurance has been available for UAV operators since 2016 and has helped many operations to get started on their dream of owning a business. There are many uses for on-demand drone insurance, but annual policies available for drones still have advantages over the on-demand option.
In this article, we will discuss when an operator/ business owner would be best served with on-demand drone insurance and when an annual drone insurance policy is more appropriate.
How Does Verifly [On-Demand] Work?
First, let us consider that the most popular on-demand drone insurance option, Verifly, does not discriminate between hobby use and commercial use to set up a policy. The coverage area on the application is geographically based, so the underwriting takes into account the risks in the area to calculate the pricing. Commercial operations will have access to more coverage options including flying in restricted airspaces and flights at night, but a hobby pilot and even an operator competing in a drone race can get coverage through the app as of the October 2017 updates.
Hobby operations can insure their operations under some annual style policies, but the operator must first pass the Part 107 or hold a current part 61 pilot certificate. The benefit is that the hull coverage can be added to the annual policy if the unit cost more than what the operator is willing to pay out for damage or a replacement unit. Due to current pricing for the annual policies though, most hobby operations should look to their homeowners or renters insurance company for physical damage on their units.
Commercial operations have the option of using on-demand insurance or setting up an annual policy. Deciding which option is best for your operation requires a self-assessment. Not all UAV operations are going to be exactly similar, but looking at the guidelines of both the current on-demand option and the annual policy will help to form a path for a UAV business owner to make an informed decision.
Flying outside of the United States?
For some getting into the industry, their work will require them to go abroad to perform work. The country you’ll be operating in will determine whether or not there is an option available for on-demand drone insurance. For operators located in the United States who wish to travel abroad, an annual policy that includes world-wide coverage will be your best option.
Do you require physical damage coverage on your unit or any payload your unit carries?
Drones range in price considerably. For businesses looking to save money, a drone less than $1,000 is very easy to replace. And if it is a unit purchased from a large company like DJI, a warranty plan may be available.
However, as the needs of the client increase, the equipment prices may increase as well. It is much harder for the average drone operation to self-insure a $10,000 UAV with $7,000 of payload. On-demand insurance does not currently offer hull coverage as of the date of this article publication. This is not to say that option won’t be available in the future, but if physical damage coverage is needed, an annual drone insurance policy will be able to provide the physical damage and liability coverage.
Do you live and work in a state that has not approved on-demand coverage or will not approve it for commercial use?
For operations in Minnesota, on-demand insurance is available, but to comply with state statute 360.59: Aircraft Registration And Listing For Taxation, a valid certificate of insurance must be on file with the MN Department of Transpiration Commissioner as there is not a distinction between a UAS and a manned aircraft at this time.
Public safety is one of the main reasons for the requirement as all vehicles and aircraft are required to be insured.
New York is another state that has not approved an on-demand drone insurance policy at the time this article is being published.
The newest state that has restricted on-demand style insurance is North Dakota due to a state statute that has been on the books for more than forty years. Under Chapter 26.1-30-18. Inception and expiration of policies – Inception of hail insurance policies, all insurance policies, except hail insurance policies, are required to go into effect at 12:01 a.m on the day of inception and end at 12:01 a.m when the policy expires.
Are you performing work under a contract or need a permit that requires insurance?
Contracts can vary widely and most up for negotiations. Contracts may have clauses that require aviation insurance policies among other coverages – like commercial general liability, commercial auto, workers compensation, umbrella liability, and possibly professional liability. When a contract calls for these requirements, chances are the client will not accept on-demand coverage and will need an Acord certificate of liability that an independent insurance agent can work up. Permits are very similar and one governing body may require insurance for the duration of the project.
Are You using the UAV for internal operations?
UAV technology can be adopted by many companies and those that are looking to use UAV’s internally may consider on-demand coverage if the general liability policy is not endorsed to cover UAVs. When the flights start to add up to between 60-70 hours a year, the on-demand option may no longer be the most cost effective option. Rates for a $1,000,000 drone liability policy with one UAV have recently dropped to below $700 a year. Businesses looking to integrate drones info their operations, should consult with a licensed insurance agent familiar with UAV exposure.
Which Option Is Best For You?
There are many factors to determine if on-demand insurance for drones will be a good option for your business going forward.
If you are looking to enter the drone business, consider starting out with on-demand to see if you will have the client base in your area to support your business.
On-demand insurance should not be looked at as a long-term option if you plan to grow your business as the costs will add up very quickly.
Buying insurance on-demand is purchasing insurance at retail pricing instead of wholesale pricing. It is affordable if you only plan to use it a few times a year and do not need any other coverage outside of the coverage window.
For More Information Or Insurance Questions For Your Specific Situation
If you have questions about drone insurance or would like to learn more about insuring drone operations, please contact Evan Garmon at Evan@harpenauinsurance.com
Evan Garmon is an Insurance and Risk Management Professional at Harpenau Insurance Agency in Indiana. Since 2015, Evan has specialized with insuring UAS operations across the United States. As a hobby drone pilot himself, Evan loves hearing clients stories and chatting about the latest technology. With a solid team backing him at his agency and partnered insurance carriers, Evan is proud to be a one stop insurance solution for his clients.
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