The world of aircraft insurance presents a unique challenge—finding the right balance between over-insuring and under-insuring your aircraft. The issue, for many aircraft owners, is understanding that aircraft insurance is based on a declared value or “agreed value” and not actual value. Steve Johns of LL Johns Aviation Insurance has long discussed the risks associated with improper coverage, cautioning that the consequences can be significant. Today, with the aviation market experiencing pricing adjustments after the post-pandemic boom, these points take on a new level of importance.

Market Adjustments and Their Impact on Aircraft Values

Traditionally, aircraft values depreciate over time. However, the post-pandemic boom saw an unprecedented appreciation in aircraft values, driven by demand and a sharp reduction in inventory. Many aircraft surged in value, a phenomenon we’ve rarely seen before. Now, as we move past the highs of 2021 and 2022, values are beginning to normalize, often returning to pre-pandemic levels.

For aircraft owners who purchased during the height of this boom, this adjustment can feel abrupt, as their aircraft values may have dropped significantly in a short time. As the market corrects, owners must ensure their insurance coverage accurately reflects the current value of their aircraft—whether it’s recovering from a high point or adjusting from a lower one.

The Dangers of Over-Insuring Your Aircraft: Steve Johns’ Perspective

Steve Johns has explored these issues in detail, especially the risks associated with over-insuring an aircraft. In his original 2012 article, he pointed out: “Aircraft physical damage (or ‘hull’) policies are written on an Agreed Value basis. This means that in the event of destruction or disappearance of the aircraft, the insurance company will pay the agreed value in the insurance contract, less any deductible.”

While this policy type offers clarity in case of total loss, there’s a significant risk if your insured value is too high. Johns warned of the danger of over-insuring, particularly during periods when aircraft values decline. He referenced real-life cases where this was a costly mistake. In one example, a Gulfstream owner maintained an insured value far above the market value, which led to complications when the aircraft sustained damage. Ultimately, the insurance company opted to repair the aircraft rather than declare it a total loss, leaving the owner with an aircraft that had a significant damage history and reduced resale value.

As Johns highlighted in his 2019 follow-up article: “The insured value must accurately represent the market value of the airplane…the downside of over-insuring your aircraft may be more than just paying too high a premium: you may be forced to repair an aircraft that should be totaled.”

Setting Yourself Up for Success: When Market Value = Agreed Value

Today’s market context makes these lessons particularly timely. If you bought an aircraft during the pandemic’s peak, you might now be facing a lower market value than when you initially insured it. Conversely, if you’ve held onto an aircraft that appreciated in value, you may still have insurance coverage based on outdated, lower valuations.

Having the right insured value or “agreed value” protects you in either scenario. If your aircraft sustains significant damage, the cost of repair versus the insured value can be the deciding factor in whether the insurer will pay for repairs or declare a total loss.

Schedule an Annual Valuation with jetAVIVA

At jetAVIVA, we understand the importance of having accurate, real-time data on aircraft values. This is why we, along with our aviation insurance industry partners, recommend getting an updated valuation each year before your contract renewal. Our comprehensive market data and free valuation services can help you stay informed about the current value of your aircraft, ensuring that you’re neither over-insured nor under-insured. We are here to assist you through every phase of your aircraft journey—from acquisition to valuation to insurance guidance.

Whether you’re reassessing your coverage or looking for support in understanding the market, our team is here to help you navigate these critical decisions with confidence.

Read More:

Accurate Insurance Offers Assurance: The Hidden Risk of Over-Insuring Your Aircraft (By Steve Johns, 2019)

The Agreed Value Contract and Danger in Over-Insuring Your Aircraft (By Steve Johns, 2012)