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ISSUE 218 - May 2012
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Protect your Avionics Investments

By Scott Sky Smith
SkySmith Insurance Agency

Avionics is one place that almost everyone wants to spend more money. While there may be a few of you that don’t want better navigation or communication equipment, the majority of the pilots think nothing about spending a few bucks to improve the panel of their favorite aircraft.

And if we don’t own an aircraft, we still spend money on the portable stuff. Intercoms, stereo’s and headsets... and the headset market are better than ever. Anyone remember what it was like to fly without wearing a pair of headsets? I remember. I can also remember the ringing in my head and the inability to hear the controller. Not just because he was talking like a telemarketing professional, but because of the noise in the aircraft. And what about the long term effects? Studies have shown that loud noises are bad. I have family members and friends that have spent years in the cockpit of aircraft and are now hard of hearing, deaf or going deaf.

They didn’t use headsets (some actually claim the old military headsets are what made them deaf) and now they have to wear headsets all the time.

If I were to go out headset shopping at the local aviation mall, I’d look into a good quality, low cost active noise reduction unit. I never thought they were worth the money until I started to fly with one. Now I can hear all my favorite stuff from Aaron Tippin (country music down home aviation buff and pilot) to Dick Dale (king of the surf guitar Skymaster fan) and still talk to ATC. And the new intercom systems (built in and portable) can provide separation from my music selections and that new “stuff” my kids call music. Whatever kids like, as parents, we’re not suppose to like (although there are a few songs on the “hip hop” station that I like. But don’t tell them. Boy, hope they don’t read this issue). And since we can get all the benefits of an aviation sound system in a portable unit, we don’t even have to own an aircraft. We can rent an aircraft and still have all the extras. And we pilots always like the “extras”!

And we do spend the money for the “extras”. And since we spend the money, we should make plans on how to protect our investment. We try to protect our aircraft with hangars, insurance and tie downs, but how do we protect our avionics? How about the other stuff in the aircraft, things like handheld radios and GPS? What happens to them when we have an insurance claim?

First, always make a detailed list of the avionics, improvements and changes that can affect the aircraft’s value. And as I‘ve mentioned before, any improvements should be noted for an increase in value for the insurance company. You don’t want to “underinsure”. You also don’t want to over insure or try to get more credit than the companies will give you. For example, if you buy bunch of handheld units and add them to your aircraft you won’t be able to increase the value of the aircraft with the insurance company. Handheld (non permanent) avionics or accessories are not covered on aircraft insurance policies without specific endorsements. So don’t add them to the policy without getting a specific coverage. Check with your homeowner insurance company. If you are a renter, get the coverage just the same as an owner for non installed stuff, again, call your homeowners company.

And be careful when you add a new stack of avionics. Just turning over the invoice won’t necessarily give you an increase for the total amount. Often times the insurance company will not give you any installation credit. Labor doesn’t usually get added into the value. Let’s stop and think about this. When you annual the aircraft, you don’t increase the value of the aircraft each time you pay the annual bill. But often times the owner adds the cost of installation AND avionics into the increase value. This is a gray area.

If the value of the aircraft is pretty low to begin with (under book value) and you add the total cost for avionics (including labor) to the insured value. The underwriter will probably not question the value. If your aircraft is at book value or above and then you increase the value substantially, get out the proof of value, ‘cause the underwriters will want to know why. And remember, labor probably won’t be included.

But do increase the coverage. New multi function flat panel displays are great units as long as they stay mounted in the panel of the aircraft. When they’re bouncing around (stolen) in the trunk of someone’s car, they don’t seem to have much use. And panel mounted units are covered by most insurance policies. If you mount your handhelds in the aircraft with permanent connections (external antennas and power sources) you might be covered (check with your agent). And often if you bought nice and expensive headsets and your comfortable with leaving them in your aircraft, make sure they have permanent plug in locations to a permanent intercom or sound systems. Some of the aviation insurance companies will cover a headset per seat if they have installed “jacks”.

Can you get too much in your panel? There can never be too many gadgets to play with. But in a rational world (in which aviators don’t exist) the salvage value of the avionics could actually be worth more than the parts and pieces of the aircraft. Some aircraft can be overshadowed by avionics and the value can’t be increased enough. In those instances you must be careful to purchase enough insurance so you are not underinsured. If you have a $30,000 panel in an old dilapidated aircraft, you might not be able to keep the aircraft in the event of a claim against the airframe. Let’s say $30,000 in avionics, hull value of $30,000 and you have a hangar fall on the aircraft. Claims can pay you the $30,000 and sell the avionics for $20,000 (depreciated) and only lose $10,000. They came out ahead. The salvage yard gets a stack of avionics that they can sell for $20,000 plus AND what’s left of the airframe brings in a few extra dollars of profit. They came out ahead. And you, well... “Two out of three ain’t bad”.

Make sure you have enough coverage for your avionics and for your handheld backup units.

By Scott Sky Smith, SkySmith Insurance Agency

Tel: (515) 289-1439
Fax: (515) 864-0334

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