Property damage to an aircraft a business entity owns or operates is excluded under the Insurance Services Office, Inc. (ISO), commercial general liability (CGL) policy by way of the damage to property exclusion, which precludes coverage for property damage (PD) to property in the insured’s care, custody, or control (CCC). Thus, many aircraft insurance policies include physical damage or “hull” coverage. Hull coverage may also be written as a separate policy. Coverage may apply on a named perils or an open perils/all risks basis. Hull coverage is typically subdivided to address aircraft while in motion and while not in motion.
Hull coverage is usually subject to a deductible, which varies depending on insurer, the type of aircraft, and its age. Exclusions applicable to hull coverage include conversion or embezzlement, wear and tear, mechanical breakdown, electrical failure, and damage to turbine engines caused by excessive heat from operation or shutdown of the engine. Hull coverage is normally written on a valued basis, with the value of the aircraft determined at policy inception and the amount listed in the declarations. If the aircraft incurs a total loss, the insurer pays the scheduled value less the applicable deductible. If the aircraft incurs a partial loss, the insurer generally will pay no more than the scheduled value.