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Why everyone should consider drone insurance and what to ask when evaluating your options

Commercial drone pilots tend to be a prudent group. Risk management — whether through practice runs or planning — is built into the foundation of the work. Even the best drone pilots, however, can run into trouble. Crashes happen, and in some situations, no matter how much preparation you do, your organization could still find itself liable for an accident. No amount of foresight and preparation can protect your organization and assets from the potential liability risks. In cases like these, having the right drone insurance is key.

If you’re looking to use your drone for commercial purposes, a drone insurance policy should be a top priority. Here’s what you need to know about commercial drone insurance plans and how to find the right one for your organization.

Do I need drone insurance?

While drone insurance isn’t required in the U.S. the same way car insurance is, having it is still the smart — and right — thing to do. Some potential customers won’t even consider doing business without it.

An insurance policy offers protection to your business and prevents an unfortunate situation from proving ruinous in the long term. Unfortunately, drone-related incidents can happen. Some of the most common causes of incidents include malfunctioning rotors, lost GPS signal, or disconnected video transmission. Even if you’ve properly trained and registered as a commercial drone pilot, accidents can still happen. According to an FAA study, the majority of UAV accidents were connected to mechanical error, rather than human. While using top-of-the-line commercial drone equipment can reduce your risk, an insurance policy is still a smart investment.

These kinds of incidents can carry significant liability risks for your business. When your drone goes into the air, you and your business assume responsibility for any third-party damage it may cause. In addition, cybersecurity challenges like stolen data can leave you in hot water with clients and potentially liable — especially if customer data, like images of private land, are involved or lax security on your end was a contributing factor.

In addition to protecting the assets you already have, an insurance policy can help you grow your business. Clients like to see responsibility, and flying insured is an indicator of a certain level of professionalism and that you take safety seriously. A drone insurance policy means that your stakeholders can rest easy.

Ultimately, accidents happen to even the best pilots. Bodily injury or property damage to third parties is a real possibility any time you take to the sky. With proper drone insurance, however, the burden of paying for those damages won’t fall to you alone. Even if no other employees or third-party property are injured, your drone is still your livelihood and was undoubtedly a major investment. As drone technology increasingly becomes more sophisticated and powerful, the need to protect this valuable property has become more apparent than ever.

What are my coverage options?

There are two types of commercial drone insurance: liability and hull. It’s important to understand the difference between the two and recognize what kind of coverage each promises. Ideally, enterprise drone users should have both types of insurance.

Liability Insurance

Drone liability insurance is a type of coverage meant for third-party incidents such as bodily injury or property damage, as well as what’s called personal and advertising injury — which means that a third party has incurred harm besides a bodily injury. Some examples of this would include nuisance or trespass-related litigation if you fly over private property.

A typical drone insurance policy will provide you $1 million in coverage. But it is not uncommon to see larger firms demand higher limits of standard minimum liability (around $2.5 million) when more risk is involved.

Hull insurance

Hull is for damage to your drone itself. This can include anything from the lost value of a UAV to labor costs involved in the repair. Depending on your policy and provider, hull coverage can include payment if your drone is stolen. Specific policies vary in the kinds of damage they cover, so be sure to read carefully if you’re worried about a certain kind of damage.

The hull premium, or the amount you’ll have to pay out of pocket, is based on the value of the drone and its equipment, including cameras and sensors. Generally, this is calculated using a percentage of the insured value of the drone. Hull insurance plans will also often have deductibles, which are not nearly as common for liability coverage. An insurance broker may also ask you for information about the industry you’re working in, where you’ll typically be flying, and the kind of training you’ve received.

Making sure you’re getting the right coverage

Notably, it’s important to ensure you’re purchasing a policy made specifically for drones. As a commercial drone pilot, you probably already have experience insuring your business. The typical insurance provider, however, does not cover the use of a drone. Drones are classified by the U.S. government as a form of aircraft and any mishap arising from their use isn’t typically covered by a general liability policy. Without the specialized coverage listed above, you’re on the hook for any third-party bodily injury, personal injury, or property damage claims.

To play it safe, be sure to get your policy reviewed by an insurance agent before you sign anything. Policies that don’t cover aircraft should include a specific exclusion clause (conveniently listed in alphabetical order). However, even without a written exclusion, you should still look for a policy the explicitly covers drones. f you do not see any mention of drone coverage in your policy, it’s safe (or unsafe, if you will) to assume you will be taking to the skies unprotected.

How much does drone insurance cost?

Commercial drone insurance is similar to insurance in most other industries, with extremely variable pricing based on the unique needs of an individual drone pilot and the risk of their work. Because of the varied nature of drone use, including time frames and liability limits, rates, and payment plans be anywhere from $5/hour to up to $1,000/year. Insurance liability limits, meanwhile, range from about $0.5 million to as much as $10 million.

Notably, pricing trends often vary between hull insurance and liability insurance premiums. It’s not uncommon to see hull insurance premiums go up over time or watch liability premiums decrease after a consecutive period of coverage without incidents or claims. The pricing pattern reflects the frequency of hull claims compared to liability claims, with insurers gaining more loss history in this ever-evolving field.

Before zeroing in on a drone insurance policy or deciding what liability limit you need to set, be sure to ask yourself:

  • What are the potential risks associated with your organization’s work?

  • What kind of coverage do my clients expect?

  • What is the timeline of my work? Per project, seasonal and year-round coverage options all exist.

  • Do I need both liability and hull policies?

Whatever plan you decide on, it’s important to ensure you’ll be receiving a Certificate of Insurance (COI), also known as a proof of purchase, with your policy document. The COI should include key information like the policyholder’s full name, the policy period, policy number liability limit, and any additional insured staff. Many clients will ask you to show your COI before you start a job.

While your inner penny-pincher may want to put off paying for drone insurance, the right policy has the potential to offer long-term savings. In addition to the added peace of mind, holding a commercial drone insurance policy sends a powerful message to potential customers about the safety and professionalism of your business. You can also consider a protection plan for basic problems like collisions and water damage. For issues like these, you can count on DJI Care Enterprise, our own coverage plan for our drones.

Credit: DJI Enterprise

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