Drone Insurance

Drone insurance liability coverage allows drone owners to make arrangements to deal with the financial liabilities that may arise from the commercial use of their drones. Personal insurance coverage does not provide coverage for any mishap that might occur because of the drones used. Hence, separate insurance for drone users is a must.

While machines are leveraged for almost everything, drones play a critical role in saving time, resources, and lives, capturing memories, strengthening security, etc. These unmanned aircraft systems, though extensively functional, hold a significant risk of damage or injuries to people. Its operators need to get their drone operations insured to avoid any financial liabilities arising from it. 

To process drone insurance, applicants need to present the drone's invoice, registration certificate, images, serial number, and other relevant documents. Although it is not mandatory to have UAV and drone insurance as per Federal laws, different states have various laws and regulations pertaining to the safety of drone operations. Certain states have ascertained a minimum sum insurance limit for flying a drone. The insured party can raise a claim through a claim form along with the photographs of the damage and other required documents. However, claim settlement is processed only after a proper claim inspection by the designated surveyor or investigator.

Though a drone comes in different price ranges, it may not be as expensive as its insurance cover. This is due to the risk of accidental damage or injury to other people that a USV carries when it flies in the air. However, the following factors determine the drone insurance cost:

1. Insurance type, whether comprehensive, hull, on-demand, or liability cover;
2. Desired sum insured;
3. Required insurance period;
4. Recent value of the respective drone and its ancillary equipment to be covered;
5. Its usage, whether commercial or recreational and the level of risk involved in such operations;
6. The geographical region of operation; and
7. Pilot or operator's authorized experience in flying the drone.

Based on the purpose for which the drone is to be used, like weddings, investigations, surveillance, construction, delivery services, etc., the coverage can be annual, monthly, weekly, daily, or even on an hourly basis. Let us now discuss the cost and coverage of some prominent types of drone insurance:

1. Hull Insurance: A hull cover protects the drone from any damage, loss, or theft; it is usually 8% to 10% of the USV's annual value.
2. Liability Cover: A first-party and third-party liability cover can cost somewhere between $500 to $1000 annually if the desired sum insured is $500,000 to $1 million.
3. On-Demand Insurance: The on-demand cover is for a short term as required by the insured party, starting from $10 for an hour, and may vary per the prevailing circumstances.
4. Comprehensive Insurance: A comprehensive plan may include two or more benefits or types of coverage. A hull and liability would together cost more to the insured party since they offer more comprehensive protection.

The drone insurance coverage has some exclusions that could deprive the insured party of the promised benefits. Therefore, it is recommended that coverage seekers go through the insurance contract carefully to learn about such conditions and make a decision accordingly. Some of the standard policy exclusions include:

1. Any trial fly;
2. Damage caused by molds, fungus, infestation, and vermin;
3. Gradual depreciation, wear and tear of the drones;
4. Unauthorized or non-compliant use of a drone against the prescribed guidelines;
5. Any liability arising due to the drone going beyond visual line of sight (BVLOS);
6. Uncertainties pertaining to war conditions;
7. An accidental damage caused due to nature, i.e., pollution, noise, electromagnetic or electric interference;
8. The drone pilot or operator flies the USV after taking alcohol or drugs and
9. Injuries or damage resulting from military use of drones.

The drone operators often get a drone cover to protect themselves from the considerable liability arising due to the enormous damage these small USVs can cause to others. Some examples signifying the need for drone insurance coverage are as follows:

Example #1 

A drone service provider company, XYZ Drones Pvt. Ltd., has taken a commercial drone insurance plan from BWIFLY for a liability sum insured worth $500,000. Suppose the drone operator accidentally crashes the drone while taking a delivery parcel to the customer; then BWI would be liable to pay for the damage to the parcel. Also, the crashed drone falls on a person cleaning the lawn. Thus, the insurance provider will compensate for the injuries caused to the third party, including his medical bills. Also, BWI paid for the repairs of the damaged drone, thus saving XYZ Drone Pvt. Ltd. from significant financial liability.

Example #2

In 2019, ARPAS-UK Member Flock introduced Flock Enterprise, which became the first product to offer real-time insurance to drone fleets. The company uses its proprietary Rick Intelligence Engine to assess the real-time risks that individual drones are exposed to. Based on the same and a few other factors, the company analyzes the cost of coverage for drone owners and operators. 

As a result of this real-time approach that this Big Data player adopted, the insurance providers gained better insights into the risks associated with drones being used for commercial purposes. In addition, it also helps identify safer flights and thereby enables insurance providers to offer rewards vis less expensive insurance premiums for them.

Example #3

On February 11, 2020, SkyWatch, headquartered in Palo Alto, California, launched its drone insurance product in Ontario, Canada. The insurance was underwritten by Starr Insurance Companies, with insurance carriers rated A by AM Best. SkyWatch.AI offers liability coverage for commercial and recreational drone pilots by the hour, month, or year. Their telemetry-based risk analysis platform provides real-time quotes and assists pilots in flight planning and hazard avoidance. Pilots had the opportunity to reduce premiums over time by maintaining safe flying practices, as marked by their telemetry-based Safety Score. SkyWatch drone insurance is accessible through their website and mobile apps, which serve customers in the US, Canada, UK, and Israel.

A comprehensive drone insurance policy may comprise most of the following features or protection against any drone accident:

• Payload Cover: Drone insurance compensates for any accidental damage to the drone or payload arising due to its operation or flying, such as damage to the goods it was carrying.
• Hull Cover: The insurer would bear the financial consequences of any loss, damage, disappearance, or theft of the drone.
• Equipment Cover: It covers any damage to the drone's parts, engine, battery, or other equipment in the course of flying.
• Personal Accident Cover: The plan often covers the expenses of medical treatment or hospitalization if the drone accident causes injury to the authorized pilot or operator.
• Third-Party Liability: It is one of the essential benefits of liability cover, whereby the counterparty or other individuals who incur bodily injuries or loss of life due to a drone accident are compensated.
• Data Protection and Cyber Liability Cover: It protects the drone's software and the data it captures against cyberattacks, data breaches, or similar threats.
• Add-On Covers: There are multiple other add-on benefits that the insured party can get, like on-demand or pay-per-use coverage, night flying insurance, training cover, and even beyond visual line of sight (BVLOS) insurance facilities.
• Non-Owned Cover: If someone takes the drone on rent, then they can mitigate their financial liability by taking non-owned insurance.