How does an insurance company determine total loss?
Some companies declare the aircraft a total loss when the estimated cost of repairs exceeds a certain percentage (i.e., 70%) of the insured value. If a company does not use a percentage, they will usually declare an aircraft a total loss when the estimated cost of repairs and the aircraft salvage value (the damaged aircraft’s value prior to repairs) exceeds the insured value. After the aircraft has been declared a total loss, the insurance company will pay the policyholder the insured value, less any deductible. After payment has been made, the insurance company will retain the salvage. An aircraft that has been stolen or disappears will be considered a total loss if it is not found within a specified period of time. What are the problems of either overinsuring or underinsuring an aircraft? A good rule of thumb for determining your aircraft’s insured value is to insure it for the cost of replacing it with another airplane just like it. With an overinsured aircraft, an insurance company
