In the United States, you are not legally obligated to purchase insurance for a personal use drone, like those used by hobbyists or for recreational enjoyment. The FAA requires consumer drones be registered, not insured.
However, based on current drone accident statistics, it would be a wise move to take out some sort of liability insurance.
Because drones can be a costly investment, it would also be wise to purchase some sort of insurance covering damage to your drone.
For commercial drones, even for use in a small or limited liability business, insurance is required. If caught operating a commercial drone without insurance, fines may be imposed.
Here is your step-by-step guide to drone insurance.
Step-by-Step Guide to Drone Insurance – Who Needs Drone Insurance?
With the popularity of drones increasing each year, the FAA stepped in with regulations for drone usage. In 2016, the FAA adopted Part 107, which provides guidelines for drone operation.
As a means of protection against liability, property damage, financial loss and replacement, the drone insurance industry was born.
Drone usage in both personal and commercial markets has literally exploded. In 2018, the number of registered consumer drones skyrocketed to over 1,000,000.
Both for the hobbyist and commercial sector, there are more uses for drones than ever before. Some of the popular commercial uses include more affordable and efficient ways for photography, inspections, agriculture, professional sports, law enforcement and surveying.
Since that time, several specialty drone insurers entered the marketplace. These niche-specific insurers offer an array of affordable drone, also known as Unmanned Aerial Vehicles (UAVs), insurance policies.
With greater demand for drones comes more experience regarding requirements for underwriting insurance. Insurers have made great strides in the ability to more accurately calculate premiums based on drone value and usage.
Drone insurance is available through major insurance providers or through specialized drone-specific insurance companies.
Step-by-Step Guide to Drone Insurance – Benefits of Drone Insurance
If you are a drone hobbyist flying periodically and for recreation only, you probably don’t need drone insurance. In fact, it might be less expensive to repair or replace parts of an existing drone or purchase a new model altogether instead of investing in an insurance policy.
However, if the drone is used for business purposes, it’s time to check into coverage and rates.
The best determining factors of choosing the right drone insurance policy are to determine the use and cost of the drone. Also consider flying location and potential of injuries and/or property damage.
Another reason to get drone insurance is to protect expensive, sensitive equipment carried on the drone, such as cameras or mapping software.
In addition, if the drone itself or replacement parts are costly, you may want to consider insurance to protect your investment, while maintaining consistent drone operation.
Drone insurance helps protect from the following:
If the dollar amount of loss is reasonably insignificant, it may make more sense to pay for the damage instead of filing an insurance claim.
However, protecting yourself from costs incurred due to injury to people or property damage of others can add up very quickly. Having to cover costs due to a drone injury may require insurance to cover potential hospital and medical bills. The same applies to another person’s personal property such as a vehicle or home.
Insurance policies can also provide coverage for potential lawsuits and legal fees.
Drone insurance can save you from bankruptcy in the event of such accidents. Anytime you are flying a drone around people or structures, you are moving yourself into the higher risk category where liability protection is a necessity.
- Damage to expensive repairs or replacement parts.
- Damage to equipment such as laser scanners or cameras.
- Accidental damage protection due to fall or crash of the drone.
- The more expensive the drone or accompanying equipment, the more sense it makes to carry insurance.
- For recreational use, an extended manufacturer’s warranty may cover parts and repairs which would make the need for insurance obsolete.
Business or Contract Requirements
For commercial use, you may be contractually bound to carry drone insurance. This protects both you and the hiring firm from unforeseen accidents or potential liability issues.
Although not required by federal law, each municipality or local branch of government may require liability insurance to work in their communities.
A project such as surveying, mapping, filming or photography may require proof of insurance to operate a drone. Drone insurance removes liability issues from both the contractor and the municipality.
Check with each individual municipality to make sure there aren’t any specific rules or requirements regarding drone insurance.
Types of Drone Insurance Coverage
Since this market is new, the rules, regulations and number of available policies and coverage limits are changing fast.
As new drone uses emerge, new types of coverage becomes available to drone operators. It’s more common for commercial policies and coverages to be in place and follow somewhat of a guideline.
The two main types of drone insurance available today:
Liability insurance is the most common and most expensive type of insurance policies. If considering drone insurance, this is the one that is the most important.
Why? Due to liability, whether it be damage to property or injury to people, costs can climb into the thousands of dollars at an alarmingly fast rate. Anyone who has ever been in a car accident or been through some sort of homeowner claim knows how expensive resulting repairs and medical expenses can be. The same is true for liability caused by a drone.
Drone liability insurance is in place to protect you from costs incurred from injury or property damage by third party claimants.
As you check into liability insurance, check into coverage detailing the possibility of coverage from theft or damage, as well.
The amount of coverage and premiums are based on the type of drone in operation, location, amount of skill and expertise of drone operators and whether drone usage is for personal or commercial use.
There may be coverage restrictions based on training and experience, especially with commercial drone operators. An insurer may need you to provide documentation of flying hours, just like getting a driver’s license for a vehicle.
As liability insurance protects you from third party claims of injury and/or property damage, hull insurance is in place to protect and cover the drone itself.
Because drones, especially commercial drones, can be a major investment, hull insurance provides coverage for incidental damage to your drone.
Hull insurance covers such accidents as drone crashes or damage from a fall. Hull insurance pays for repair or replacement parts based on the amount of damage.
Hull insurance does not necessarily cover equipment carried by the drone such as scanners or cameras. A separate policy should be considered for equipment other than that on the drone itself.
Premiums for hull insurance vary, but are based primarily on make, model and value of the drone. The more expensive the drone, the more you can expect to pay for annual insurance premiums.
Optional Drone Insurance
There are a few optional insurance types for drones.
This policy covers equipment carried by the drone. This is the type of policy required for expensive equipment like cameras, sensors, mapping equipment or laser scanners.
Because this equipment tends to be delicate, the odds of damage increase. Payload insurance can pay for repairs or replacement equipment. As with hull insurance, premiums are primarily based on the value of equipment.
Ground Equipment Insurance
For commercial drone operators, there may be expensive equipment on the ground in place to work with the drone. Equipment such as remote controls, computers or additional sensoring equipment work together with the drone to capture data.
This policy covers repairs or replacement for any incidental damage to ground equipment.
Non-owned Drone Insurance
This insurance policy covers either drone or ground equipment used for a commercial project. It covers damage incurred to an outside party brought in for the job.
Basically, if a business does not have the drone or equipment for a project, they sub-contract an outside party to perform that portion of the work. Non-owned insurance covers damage to the outside party’s drone and ground equipment.
Optional non-owned insurance policies:
- Non-owned UAV liability – The requirements for coverage and cost of premiums for this type of insurance is similar to general liability insurance. Non-owned liability insurance covers property damage and personal injury. An insurer may request documentation from the third party as to training and proof of ownership of the equipment.
- Non-owned hull insurance – Provides protection from the costs of repairing or replacing damage to hired drones.
- Non-owned payload insurance – Provides protection from costs of repairing or replacing equipment owned and carried by a hired drone.
Cost of Drone Insurance
Because costs vary based on the use and type of drone, it’s hard to provide an approximate cost of drone insurance.
The best advice is to contact drone insurers for an estimate of costs based on equipment, value and usage. Obtain several quotes for an apples-to-apples fair market comparison.
As a general guideline, UAV liability insurance is the most expensive and on average, the minimum amount of coverage is $500,000. Annual premiums for the minimum liability coverage is approximately $600 or less per year. The more coverage you have, the higher the annual premiums.
For recreational drone uses, annual insurance costs are considerably less. A minimum deductible policy tends to run right around $100 per year.
Again, the insurance provider can provide more specific quotes based on the value of the drone and equipment. It’s also a good idea to touch base with your home insurance provider to find out if any drone costs can be included with your homeowner’s insurance.
There are a few other things you’ll want to keep in mind, such as:
- Amount of Deductible and Difference in premium costs
- Out-of-State or Country Coverage
- Shipping or Transit Coverage
- Multi-drone discounts
- Bundle options to save money on combining liability and hull insurance packages
Drone Insurance Summary
Hopefully, this step-by-step guide to drone insurance is helpful to you.
There are a lot of options; with more options becoming available every day. It is important to weigh the value of your drone and equipment against the cost of an annual insurance policy.
By working with the true value of your drone/related equipment and determining your liability risks, you will be in a much better position to determine if drone insurance is a good fit for you.