I learned that knowing your way around the cockpit doesn't mean you know how to buy life insurance
Recently, a friend suggested I look into purchasing new life insurance. A price war is going on in the insurance industry, he said. Rival insurers are undercutting each other's premiums on term policies to hold onto their market share. As a result of that competition, rates have declined more that 40 percent in the past 24 months-wow! I decided to take a look.
The first thing I learned is that you need to read the policy you have or study any one you're considering buying. Lots and lots of policies have aviation exclusion riders or waivers. Translated simply, if you have a fatal accident, your life insurance doesn't pay. I remember when I bought my first life insurance policy, the guy who sold it to me said, "Ah, we won't mention that you occasionally fly airplanes or they'll charge you a whole lot more." He was right. But what he didn't say is that they also won't pay should I be in an aviation accident.
One thing I found particularly annoying is that with many insurers, you're automatically penalized just because you fly. Underwriters categorize you by the risk they think you represent and, in many cases, pilots are herded into the same group with smokers. That made me angry. This was my reward for 30 years of accident-free flying? And that old joke about the most dangerous part of any flight being the drive to the airport happens to be the truth.
Equally frustrating was the lack of dependable feedback and information from insurance companies. I responded to ads that guaranteed me the lowest possible rates but, when it came down to fishing or cutting bait, the rates I had originally been quoted mysteriously vanished. Other life insurance companies promised me the moon, but as soon as the word pilot came up, magically, so did the rates.
The one high point of my journey was running across a pilot who actually sold life insurance for a living. Ironically, he had a similar experience trying to find a policy, and decided to do something about it. Bill Fanning, president of the Pilot Insurance Center in Addison, Texas, went to the life insurance industry with a proposal. He argued that safety rates for general aviation have been steadily improving over the years, and that pilots as a group tend to be healthier and wealthier that the general population. How about giving us a break?
The results have been remarkable. More than $1 million of this more pilot-friendly insurance had been written before I climbed on board, and the numbers continue upwards as the word spreads. If there's a lesson to be learned from this experience, it is to encourage you to find an insurance company that speaks aviation. In my own experience, that difference made a wonderful improvement in my premiums. I spend less money on insurance, and more money and flying. And in my book, that's worth a few extra moments of my time. P&P
Tips on life insurance for pilots
- Read the policy for any aviation exclusions or waivers.
- Pay the premium annually if you can. Insurance companies add an additional charge for monthly and quarterly premium payments.
- Thoroughly investigate any additional riders. For example, "Waiver of Premium and Accidental Death Benefits" might not be in your best interest. (Statistically, you have less than a two percent chance of ever making a claim.)
- If you're thinking of purchasing new life insurance, consider doing it now before a proposed regulatory change could disallow premiums guaranteed more that five years.
- Research what you have before you buy a new policy. If your health has changed, you may not be insurable or your existing policy could have substantial penalties for early withdrawal.
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