Trying to understand drone insurance can feel like trying to navigate through a dense fog.
There are multiple options available, and the details are often written in complex legal jargon not covered on your Part 107 exam.
Fret not; there is hope. With a little guidance, we can clear the fog and help you understand what you need to know about drone insurance.
What is drone insurance?
Accidents happen. Every drone flight has an inherent risk that something could go wrong.
Factors include pilot error, weather, bird strikes, mechanical malfunctions, loss of line of sight, electromagnetic interference, and any number of unexpected issues.
Even with the most diligent preparations, accidents can still occur. If an incident causes damage to property or injury to a person, you could be liable.
Drone insurance is protection against financial loss in the event of a drone accident.
According to the Federal Aviation Administration, there are over 1.5 million recreational and 622 thousand commercial drones registered in the United States.
By 2026, registrations are expected to increase to over 1.8 million and 968 thousand, respectively.
An accident is required to be reported if it results in a serious injury to any person or loss of consciousness, or damage to property (excluding the drone) in excess of $500.
Accidents can be reported via DroneZone or by contacting the nearest FAA Flight Standards Distribution Office.
Additionally, close calls, hazard violations, and safety-related incidents can be voluntarily reported via the NASA Aviation Safety Reporting System.
Is drone insurance required?
Despite the many rules and regulations, the FAA does not require operators to have drone insurance.
However, some clients may require the drone pilot or overarching company to carry drone insurance for a job.
Despite the many rules and regulations, the FAA does not require operators to have drone insurance. There is currently no Federal Law that mandates drone insurance.
However, it is important to check the local ordinances where you will be flying.
Many state and local Governments have implemented rules and regulations specific to their areas.
For example, Jackson County, Missouri, has a local ordinance that requires valid liability insurance and a permit to fly in the county parks.
It is also a common practice for clients to require the drone pilot or overarching company to carry drone insurance and provide a Certificate of Insurance before starting work.
Regardless of whether you are a pilot or a client, it is your responsibility to do the appropriate research and analysis to determine any insurance requirements.
Web searches, blogs, drone insurance websites, and drone forums are great places to begin your search.
You will want to review the state, county, and city ordinances for local UAS rules. This will also help you to know if an area is a local no-fly zone, has special rules, or requires a permit.
Always take the time to read the actual referenced law or ordinance for yourself. Sometimes the summaries misinterpret the information or leave out key details that you may be held accountable for.
Who should consider Drone Insurance?
Both pilots and clients need to have an understanding of drone insurance.
The pilot in command is responsible for the safe operation of the drone. In the event of an accident, the pilot may be held liable for the damage or injury caused.
Depending on the circumstances, clients can be held liable too. It is important to discuss these factors before initiating a contract.
Questions pilots should ask clients
As a pilot, you should inform any clients about the type of drone insurance you carry and the amount of coverage.
A few recommended questions to ask your client are as follows:
- Do you have an overarching drone insurance policy that would provide coverage for the scope of the contract? (This question is relevant in the case of a pilot performing a subcontracted service for a drone company. The overarching company will most likely have liability coverage that will extend to the pilot for the specific job and probably will not include the pilot’s equipment.)
- Do you have specific coverage requirements?
- Have you identified any specific safety risks I should consider in my risk assessment?
- Do you have a requirement to be included as an “Additional Insured?”
- Are there any local ordinances that you are aware of that could restrict flight operations, require a permit, or mandate specific insurance coverages?
Questions clients should ask pilots
As a client, it is wise to inquire about drone pilots’ or companies’ insurance coverage. Several recommended questions for clients to ask are as follows:
- Do you have drone insurance?
- What types and amounts of coverage do you carry?
- Can you provide a certificate of insurance?
- Who is covered by the policy? (This is important if you are working with a company that employs or subcontracts other drone pilots. You need to ensure that the right parties are insured for the job.)
- Can you, as the client, be added as an “Additional Insured?”
- Does the policy include a “Waiver of Subrogation?”
- What is the insurance Policy Term? (You will want to ensure the policy term covers the dates and times of the job.)
Drone Insurance Options
As the drone industry has evolved, so have the insurance options available. These options are customizable such that you can select the coverage that works best for you.
The three main options available are liability, hull, and payload insurance. Drone insurance is unique in that policies can be purchased in a variety of terms.
Standard policy terms are by the hour, day, month, or year. It is important to note that “by the hour” policies do not offer as many options as longer terms and may not include hull or payload insurance.
Policy Term Options
Pay-by-the-hour drone insurance is a good fit for pilots that do not fly often and are looking for a low upfront cost.
These policies are not offered by every insurance provider and can be purchased from on-demand insurance companies like Skywatch, DroneInsurance.com, AirModo, and Thimble.
Hourly policies cover property damage, bodily injury, and privacy claims. They are specific to a 2-mile radius surrounding the geographic area of your flight and provide coverage up to $25 million.
Note, the price is location-based and may be different depending on the geographic area.
Indoor coverage can be added for an additional fee, and flying at night may cost more.
The insurance term can be set to start immediately or up to 60 days in the future. A Certificate of Insurance is available immediately upon purchase.
Monthly policies provide continued coverage for 30 days from the start date of the policy.
With the longer term comes the following additional options: hull insurance, personal injury coverage, and medical expenses.
Depending on how often you fly and the flight risks, this may be a more cost-effective solution.
Annual policies provide coverage for 365 days from the start date of the policy.
Annual insurance has the same coverage options as monthly and is priced at the lowest rate for long-term costs. The coverage can begin immediately if purchased from an on-demand insurance provider.
Annual drone insurance policies can also be purchased from traditional insurance brokers.
Traditional brokers are an excellent resource for unique requirements such as beyond line-of-sight operations, cyber liability, workers comp, non-owned coverage, international coverage, test/development coverage, and liability limits greater than $25 million.
Some brokers have even started offering on-demand policies as well.
Some prominent traditional Drone insurance brokers are as follows:
- Aerial Pak
- Avion Insurance
- BWI Fly
- Global Aerospace
- United States Aircraft Insurance Group
To be liable means to be legally responsible. In simple terms, it means that you can be sued. Liability insurance helps protect you financially should this occur.
If your drone cracks a window or crashes into a rooftop, the costs may be manageable. If your drone hits a person after falling from 400 ft and causes hospitalization, the costs could be astronomical.
Like seatbelts, liability insurance covers you just in case something bad happens.
Typical policies range from $0.5M to $5M. Custom and higher dollar amounts are available. The amount you need is a factor of risk.
If you are flying in a densely populated area with lots of expensive property, you may want more coverage than if you are flying over an open field by yourself.
In aviation terms, the hull is the main body of an aircraft. Hull insurance is for your drone.
Having liability insurance alone will not cover repair/replacement costs of your drone in the event of an accident.
For a low-priced hobby drone, this may not be necessary. But if you are using a high-end professional drone, the replacement cost could be thousands.
Drone manufacturers are aware of this, and some offer their own in-house insurance policies. When evaluating policy options, it is important to read the “fine print” and understand exactly what is covered.
The insurance company will look at the make and model of your drone in its pricing analysis.
A payload is considered anything carried by your drone that is not necessary for its operation.
This is primarily for additional equipment attached to or carried by your drone, such as cinematography cameras, lights, drop mechanisms, and LiDAR systems.
This equipment could be more expensive than the drone itself and may not be covered by hull insurance.
A myriad of additional options and add-ons are available for drone insurance. This includes, but is not limited to, personal injury, medical expense, cyber liability, and foreign operations coverage.
It is important to take the time to consider your unique needs and risks as you look for a policy.
Personal Injury coverage is not related to bodily injury. It is for injury caused by slander, false arrest, and unintentional violations of privacy, the latter probably being the largest risk for a drone pilot.
Medical expense coverage is an add-on for medical expenses related to injuries caused by your drone. They can be paid on a no-fault basis but do not replace your liability insurance.
Cyber Liability coverage is a relatively new add-on. It primarily covers you in the event of a cyber attack that results in a crash.
For example, if someone hacks your drone or ground station during flight and causes an accident.
Additionally, some policies cover the expenses and fines you could be subject to in the event of a data breach.
Insurance policies are written specifically for a specific coverage territory. A policy written in the United States of America would not provide coverage in another country.
For trips abroad, it is important to ask your insurance broker about Foreign Operations coverage.
Key Legal Terms
Insurance policies are written in legal terms. Do not get discouraged if you do not understand them at first.
Here are a few key terms to help you navigate the options available and ensure you have the coverage you want.
The named insured is the policyholder. Typically this is the drone pilot or a company the pilot works for.
This is an individual or entity added to the policy that will be covered. Examples include clients, a contracted pilot operating for the named insured, land owners, and production companies.
The additional insured is included on the certificate of insurance and can be added at no extra cost.
It is a common practice for clients to request to be an additional insured on the policy. This provides them with liability protection in the event of an accident.
A premium is what is paid to the insurance company on a recurring basis for the policy.
This is the amount of money the policyholder is responsible to pay out of pocket before the insurance provider will pay for expenses. This is generally 5-10% of the hull value.
Certificate of Insurance
The certificate of insurance is a document that provides proof of insurance. It includes the named insured, policy period, policy number, issuing company, coverage territory, and any additional insured.
Clients will often request this document to ensure the pilot or company has coverage.
Waiver of Subrogation
Subrogation is the practice of substituting one party in place of another to make demands with respect to a debt.
For example, if the insurance company pays the insured for a claim, it can seek reimbursement from an at-fault party.
On drone policy, a waiver of subrogation waives the right for the insurance company to seek reimbursement for losses paid to the additional insured (typically the client).
Clients can request this be included with the certificate of insurance.
The declaration page is a key page in the policy that lists all the critical coverage information. It’s the easiest page to look at to get an understanding of what coverage is included.
The amount of coverage, liability limits, and territory can be found on this page.
Like putting on your seatbelt in the car, drone insurance is an important financial protection in the event of an accident. It could protect you from financial ruin.
There are many options and add-ons available. Understanding the key terms will help you clear the fog and select the best policy for your situation.