Should Santa start dropping insurance policies down the chimney this year? It’s not entirely shocking that a Christmas gift could require insurance. Tiffany diamond earrings, sports cars with big red bows across the hood … even a surprise cruise should be insured. But those big-ticket items are very special occasion gifts for Santa’s elite … not a $50 toy for your 10-year-old.
Still, the big day is rapidly approaching, and that means skies will soon be buzzing with thousands of shiny new drones and quadcopters, otherwise known as Unmanned Aerial Vehicles (UAVs), Unmanned Aerial Systems (UAS), Flying Personal Vehicles (FPV), Remotely Piloted Aircraft (RPA) and Remotely Powered Vehicles (RPV). If you're think the naming conventions are convoluted, what ‘til you dive into the regulations. Whatever you call them, options are soaring and prices dropping. The flying “toys” are more popular than ever, and experts estimate almost 2 million drones to be cruising US skies by the end of this year.
Although insurance is not currently mandated by the federal government or the FAA, these UAVs are considered aircraft and operators “pilots.” Think about that …10-year-old pilots.
But, which of those flying robots should be insured?
As of this writing, insurance for recreational or commercial
drone use is not a federal requirement in the United States.
The first factor to consider when pondering insurance for your drone is whether you’ll be using it for recreational or commercial use. While the focus of this writing is of the consumer variety, it’s worth noting that drones are now essential to many professionals, from photographers to real estate agents to farmers and law enforcement officers. Drones are even being used BY the insurance industry to inspect properties affected by disasters such as wildfires, hurricanes, earthquakes and floods.Probably the two most commonly asked questions by those pondering insurance for their flying fetish are:
- Do I need insurance?
- Is my drone covered under my homeowners policy?
The answers are not as clear as you might hope (a resounding “maybe” in both cases). So, we consulted the experts … the top dogs of everything airborne … the big cheese of the skies … the Federal Aviation Administration.
It turns out that things have changed in the handful of years personal drones have been on the market. You see, way back in 1981, Congress ruled that the FAA had no jurisdiction over “model aircraft.” This worked out just fine until about three decades later, when the recreational drone market exploded. In 2015, in response to a number of incidents involving UAVs, the FAA declared that drone owners had to register with the agency any device weighing over .55 lb. and affix a registration code to the actual UAS. Lots of people were upset and complained/sued/brought up that ruling from the eighties. It was a big stink that led the federal appeals court to overturn the registration rule in May of 2017. Are you still with us?
Because, there’s more. Just a few months later, President Trump signed into law a $700 billion National Defense Authorization Act, a tiny part of which reinstated the registration rule. So, there you go. The FAA is back in power. Today, you must register any drone weighing between .55 lb. and 55 lb., whether you’re using it for fun or financial gain, to a national database.
The regulation will allow authorities to trace a drone back to its owner, which means it's vital that you're in compliance with laws and regulations and have the appropriate insurance coverage.
The Federal Aviation Administration (FAA) does require drone registration for small UAS operators of drones with a weight over .55 lb. (just over two sticks of butter). Given that most drones weigh over this amount, registration is generally required, accordingly.
Naturally, as the flying robots become more advanced, more powerful and decked out with higher quality features like cameras and video equipment, the need for insurance becomes even more clear. People want to protect their investments.
But, hang on, you have another decision to make … whether to opt for hull insurance (covers the cost of repairing or even replacing your drone in the event of a crash) and/or liability insurance. Many insurers advise that you consider legal liability insurance as a minimum. Additional coverage may include personal injury, invasion of privacy, non-owned (if you crash someone else’s drone), medical expenses and premises liability.
Yet again, the whole issue gets messy. Many insurance agents will tell you that your drone is considered a model or hobby aircraft and, therefore, your homeowners or renters insurance policies will cover it as personal property. Additionally, liability coverage under your homeowners or renters insurance should protect you up to your coverage limits.
Others maintain that typical policies do not cover damages caused by drones, and that you as a policy holder must request, obtain and pay for this coverage separately. Without it, your financial status could crash and burn.
The truth is, recreational UFAs haven’t been around that long. Insurance companies were caught out of their element when drones descended into the marketplace just a few years ago. Insurers are still gathering information about exactly what risks they introduce. Widespread use of drones—private and commercial—poses various risks, ranging from safety to the privacy of individuals. Risks arising from the use of drones could be managed by property and casualty insurers, but only once defined drone operational requirements and performance standards are in place. Complete and clear regulation, by the states and the FAA, is necessary before insurers can meet policyholder needs.
That’s why it’s a must that you contact your insurer to see what limits, if any, apply to your drone. Chances are that your agent will have to do a little research him/herself to get you a clear answer as it pertains to your particular insurer and policy. You’ll need to ask about exclusions, deductibles, liability limits and whether a claim will affect your residential insurance rates.
Registration, by the way, costs $5 and is valid for 3 years. More information about the registration process is available through UAS Registration.
Yet another consideration is whether you will be racing your drone. It’s a sport that’s growing in popularity and could be a deal breaker with your coverage. There could also be exclusions based on age, location, altitude and the value of your UAV and equipment.
DJI remains the leader in the commercial drone market with an estimated market share of up to 85%.
– drone deploy report
FAA drone registrations topped 1 million in 2017, with the FAA estimating actual units at ~1.5 million. Those numbers are expected to triple by 2021. Commercially used drone numbers are climbing at an even faster rate, with the FAA expecting growth in that market to a tune of 58.6 percent annually by 2021.
So, while it is more and more common to protect the drone itself, as well as any property damage or personal injury sustained by use of the drone, not a lot of Christmas shoppers are considering the big picture when rushing frantically through the mall. It really all falls to you, the operator (or parent, as the case may be), to stay on top of what the regulations are at any given moment.
Finding Drone Insurance...
There are several low-cost options for personal-use drone insurance, as well as conditions and restrictions for each. Once the need for insurance has been established, drone operators should contact either their existing insurance broker or one of the many aviation insurance brokers (some of whom are beginning to specialize in unmanned aviation risk). They will assess exposure, make recommendations for appropriate coverage and limits, and invite quotes from various insurance carriers.
And, yes, there’s an app for that … Veriflyis the most widely-known provider of on-demand drone insurance, offering up to $5 million of coverage starting at $10/hour. Just answer a few questions on your phone, and boom … you’re insured for one, four or eight hours.
Know the rules …Under the new 2018 FAA Reauthorization, consumer drone operators must:
- - Fly for hobby or recreation ONLY
- - Register their model aircraft
- - Fly within visual line-of-sight, no higher than 400’
- - Follow community-based safety guidelines
- - Fly a drone under 55 lb., unless certified by a community-based organization
- - Never fly near other aircraft
- - Notify the airport and air traffic control prior to flying within 5 miles of the airport
- - Never fly near emergency response efforts
Here at Agency Matrix, we live and breathe insurance. Our mission is to serve the independent insurance agency. One advantage to our system is that it allows agents to shop many insurers to find the best possible policies for you and your unique needs, even as they continue to evolve. Chances are good that UAV rates will be included in our downloads before too long. The complexities of drone insurance are evolving, but certain to simplify into a clear set of standards in the coming years. Until then, your agent is you best friend in navigating the drone zone.