Insuring an aircraft against mechanical failures is a highly specialized and often misunderstood aspect of aviation insurance. Standard aviation policies are generally designed to cover damage from external perils, such as a crash or a fire, and explicitly exclude losses that result from the internal failure of a component due to wear, tear, or a latent defect. However, specific policies and endorsements exist to provide a layer of protection against these costly and unpredictable events.
The most important concept to grasp is the distinction between a “peril” and a “mechanical failure.” A standard hull policy covers the results of a peril. For example, if an engine fire (a peril) causes the engine to fail and the aircraft to crash, the hull policy will cover the damage. But if an engine simply stops working mid-flight due to an internal component wearing out (a mechanical failure), the standard policy will not cover the cost of the engine’s repair or replacement. The assumption is that routine maintenance and inspection are the responsibility of the owner to prevent such failures.
To get coverage for mechanical failure, an aircraft owner must purchase a specific endorsement or a separate, stand-alone policy. The most common option is an “engine failure” endorsement. This rider, which is added to a standard hull policy, provides coverage for the cost of repairing or replacing a failed engine. These endorsements are often highly specific. They may only cover a total failure and not the cost of an overhaul, and they often have a high deductible. The terms are usually tied to the engine’s time since overhaul (TSOH) or total time in service, and the owner must provide meticulous maintenance records to qualify for the coverage.
For certain types of aircraft, particularly high-value piston-engine planes, there are separate, stand-alone engine insurance policies that function much like an extended warranty. These policies are often sold by specialized brokers and can provide comprehensive coverage for the cost of a teardown, repair, or full replacement if the engine fails due to an internal mechanical issue. These policies can be expensive, but they provide a crucial financial safeguard against one of the most significant and unpredictable costs of aircraft ownership.
Another form of coverage that can mitigate the financial impact of a mechanical issue is a loss of use endorsement. While this doesn’t pay for the repair itself, it provides a daily payout to the owner if the aircraft is grounded for an extended period due to a covered loss, helping to offset the financial impact of not being able to use the plane.
When seeking this type of coverage, it is essential to work with a specialized aviation insurance broker who understands the intricacies of mechanical failure policies. They can help you navigate the different options, understand the limitations and exclusions, and ensure that the policy you purchase truly protects you from the risks you’re concerned about. While no insurance policy can prevent a mechanical failure, the right coverage can prevent a mechanical issue from becoming a financial disaster.