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By: Aircraft Assessing  11-11-2011
Keywords: Aircraft, Aviation Insurance

Aviation Insurance Agreed Value

Unlike short term insurance and in particular a motor policy, aircraft are traditionally insured on an Agreed Value basis. In simple terms, this means that the aircraft owner and insurer have agreed on an amount of money to be paid out (less any policy deductible) in the event the aircraft is written off.

The benefits of an Agreed Value far outweigh any negatives but it can backfire when the aircraft is under-insured. As a general principle of insurance, in the event of a claim, the client should be put back in the same position as they were prior to the accident. That is a valid principle but if the aircraft is written off and it transpires that the aircraft was under-insured, the chances are that the client will not be able to replace the aircraft with the insurance proceeds.

As standard practice, the insurance industry and the aviation public in general have placed a great deal of reliance on the Aircraft Blue Book price guide but this publication is in no way definitive. This is particularly true when applied to our local market conditions. The publication is invaluable as a guideline but prevailing local and international market trends are what actually determine an aircraft's value.

By way of example, in the first quarter of 2006, starter aircraft such as early model Cessna 172s are commanding prices in excess of 175% of the value indicated by the Aircraft Blue Book. Typically, a mid life 1964 Cessna 172E would retail in South Africa at around R350,000 whereas the Blue Book for the same aircraft would indicate a value of R190,000.

The purpose of the Insurance Agreed Value exercise would be to provide you with a researched and acceptable basis on which to request a suitable Agreed Value from your Insurer. This would be provided to you in the form of an unbiased Agreed Value Certificate from ourselves.

Whilst an initial Agreed Value is a good starting point it would be prudent to re-assess the Agreed Value at six monthly intervals to counter any possible currency fluctuations or other influencing factors.

THE INSURANCE AGREED VALUE IS NOT A TECHNICAL OR PHYSICAL INSPECTION AND AS SUCH OUR ASSESSMENT OF THE VALUE WOULD BE BASED ON INFORMATION PROVIDED BY THE CLIENT

Keywords: Aircraft, Aviation Insurance