How Do I Get Drone Insurance for my Drone Photography Business?

YOU HAVE YOUR FAA 333 EXEMPTION. NOW YOU NEED DRONE INSURANCE.

On today’s Drone Law Pro Radio show, we discuss drone and UAV insurance policies. Learn about these topics from a top aviation insurance agent:

1. Sky Smith Insurance explains how to obtain insurance for commercial use drones under FAA Section 333 and other lawful flights.
2. Your standard general comprehensive insurance policy likely excludes all aviation related claims, including any incidents that occur during drone or UAV flight.
3. You need general comprehensive drone insurance and can also obtain insurance for the drone / airframe itself.
4. If you have an FAA 333 exemption, you can market your photography and data collection services as a professional business by adding your customers as ‘additional insured’ under your drone insurance policy.  The FAA laws on drones can be a competitive advantage and market barrier which helps your drone photography and data collection business grow.
5. Learn about how drone insurance works, what is covered and what is not.

Enrico: Today we are here with Sky Smith from Sky Smith Insurance and he has got considerable expertise in helping section 333 exemption holders get insured and so we want to welcome him to the show today. How you doing today Sky?

Sky: Pretty good. Thanks Enrico.

Enrico: Good. Why don’t you tell our listeners a little bit about your background in aviation insurance and then we can kind of get into the nuts and bolts about what 333 exemption holders need to be thinking about in terms of getting insured.

Underwriters Are Writing Drone Insurance Policies

Sky: I started my, I was a modeler. Airplanes, radio control, control line, helicopters. I married into an airplane family when I was getting my license, sold airplanes and got into aviation insurance in 1985 and have been doing aviation insurance exclusively until September 11. Then we added on collector cars and some other stuff to kind of supplement it. It’s still my business 90 percent aviation insurance all the major companies and I do business in 48 states. A few have even got an account in Hawaii and we sent some airplanes over to Australia. So we’ve dabbled in a little bit of everything. Most of my business involves experimental airplanes and almost all of it is personally owned airplanes. One of my customers called me with the need for drone insurance because he was being a pilot on a drone that was going to be used for a photo group. That started me into the drone insurance. I went back to all my underwriters, and the majority of the underwriters had a department that was in the drone market and they’d been in it for a couple of years. They just weren’t real heavy into the general market as its progressed. It’s exponentially grown so that’s really made a difference. They were involved in drones years ago when it was with Boeing and some of the big organizations, so this is all kind of new for them. We jumped in with both feet and I’m going to be at the InterDrone conference, I do seminars at Sun and Fun in OshKosh, at air shows doing airplane stuff. Did my first ones on drone and insurance there. So kind of just getting wet and trying to help people to get what they need to do a business on it. The FAA drone regulations are elevating the conversation on drone insurance into a very hot topic.

FAA Exemption 333 Companies

Enrico: We have a lot of Section 333 customers who are looking to get into the business and, of course, very quickly they get beyond “ I need to get my exemption” into the reality “I have to operate a business.” And the exemption can actually be a market barrier against those who are playing on the edges, who are flying unsafely and who don’t have the exemption and who don’t have insurance because if I’m a customer, if I’m a real estate broker and I’m going to hire you to come do the videography and photography for my real estate company. If I’m smart, I’m asking you about insurance. So tell us a little bit. What kind of insurance should they be looking for and what is that going to cover?

Using Drone Insurance to Sell Customers

Sky: The first thing to probably think about is you need some sort of liability insurance, property damage, bodily injury. That’s your biggest expense. A lot of the drone people say well, what’s my drone going to do? It can’t really hit anybody. I’m not going to hit anybody, it’s risk is low, but the liability pulls in, say you’re doing a photo shoot next to the highway and you create a crash, you’ve now become liable for the accident on the interstate. People don’t think about that side of it. There’s a lot more than just my drone. There’s the surrounding area. So we always tell people in aviation to buy some sort of liability. That’s the key. That’s the deep pockets. Standard policy is a $1M policy so that would cover property damage and bodily injury. That’s usually the minimum you would want to buy. It does separate you out from the average person who is not using it. I mean I called my homeowner’s and said hey, if I’m flying a drone does my homeowner’s cover it and they said well as long as you’re operating as a model. On the modeling. we could cover the liability up to the limits on you policy. So if I had $300,000 homeowner’s policy, I’d have $300,000, but the minute I start acting as a professional, then it becomes no coverage on it. The same thing we have farmers doing the same thing. They want to go out and they want to search their farms for their crops and the minute they start using that as an advantage to their business then the FAA starts looking at it as a commercial operation. So we try and tell people that liability is the least you want to buy and it’s the most important factor of it. If you’re a Section 333, it separates you out because most companies don’t want to hire you if you don’t have insurance. So it makes it very difficult, I think, to get a job if they understand liability on their business, they don’t want to take on your responsibility and once you buy the insurance, most of them will ask you to take them on as an additional insured on it even. They want some other language to protect them if you’re working for them. So it’s going to become a requirement if you’re a 333. You don’t have to be a 333 to buy the insurance. You can buy it without that for liability. There’s one company that does liability only, but they kind of open it up, saying it’s up to you to maintain the legal status of it and follow the FAA guidelines. Are you flying it as a model, are you flying it as commercial, are you using it for personal? It’s up to you on it. Chances are you aren’t going pay the money to buy the insurance if you aren’t going to use it as (?5:36), commercial lines.

Enrico: So another question we’re getting from our 333 clients is okay if I just go out and buy a general comprehensive liability policy, will my drone activities be covered under that policy? Do I need a rider? Do I need special insurance? What should we be thinking about Sky in terms of just general liability insurance? The commercial uses for drones are endless.  Bu there are still alot of questions.

Sky: Typically, you’re general liability insurance likes to exclude anything that has to do with aviation. Once you mention drone or you mention airplanes or anything like that they are excluded so you have to ask specifically when you buy your policy if they will cover operations from an unmanned unit or aviation aspects of any kind. There are a few right now, with the agricultural industry, there’s a few companies that will cover the liability under their agricultural policy, they’ve already started to include that, so it’s important to ask your current carrier if they cover it. That’s like I did, I called my homeowner’s said okay will you do. I have American Family, I think is the company that’s owns my office insurance. I called them up will you cover it? No, not if it’s for commercial use. So it’s the specifics on it. General liability is good but it might cover if you have set up your tables and you’ve got stuff and people walking around. That might cover you at that operation, but once the drone is flying, chances are it won’t cover any actions from the drone itself. That would be kind of, you have watch the differentiation between the comprehensive like the slip and fall idea, well they trip over stuff I set up in the field, that’s one thing compared to my actual drone flying.

Enrico: If you’re a smart business owner and you’re looking to start up in the commercial drone use of space and you’ve gone your 333 exemption. Get legal, fly safe, fly compliant with the 333. Get insurance and then when you go market to these customers, you’re going to have a huge advantage over the wannabes and pretenders out there who are also competing against you and that’s what we’re telling people. I assume you’re telling your customers the same thing.

Drone Photographers Need to Be Professional

Sky: I think that’s really important because it does separate you out from the average operator. I think to make it a business, it makes you look a professional if you do all of those steps. There’s a lot of people out flying drones and they shouldn’t be doing them as commercial use and they’re trying to fill in and they haven’t taken the time or they don’t want to spend the money. It happens in every industry but if you set yourself aside as a specialist that you’re going to be a professional in it, that’s one of the things is insurance, and it helps, to sell your product.

Enrico: Sky, what if I wanted to get my airframe insured because I think we all know that there’s fly aways and there’s a lot of potential for pilot error and some of these drones are certainly pretty pricy. There are some economical ones, but more of our Section 333 customers either have an Inspire or are looking to buy an Inspire. So those are more expensive models. So tell us what our customers should be thinking about in terms of protecting the airframe.

Sky: Hull insurance is available. It varies about 7.5 to 8 percent rate, approximately up to about 10-12 depending on the unit. So the more expensive the unit, the better it is to put coverage on it. It’s really pretty reasonable coverage. It is something that if you had a $1,000, it’s probably not worth putting coverage on it. A thousand dollars at 7.5 percent. You’re not going to spend enough on it and then you’re deductible is going to be probably 5 percent so you’re not going to have that a lot of coverage on it. But if you have a high priced unit, you know $20,000 – $30,000 it’s well worth it. It will protect it if it’s damaged, if it’s loses control, if you’ve lost signal. I sent a note to an underwriter. I said, okay, what if we sinking in a lake. You know we’re flying over boats and we sink it. Chances are if it’s really deep, we won’t get it, but it’ll be covered.

Then there was a big conversation, there was the videos of the guy with the fishing lines that caught a drone at the pier. So we asked, we said what if that pulled it down, would you cover it? They said well, malicious activity falls under the war category. Somebody said what if I just shoot it down? Don’t do that for one thing, but if you do, that falls under the war category. A malicious act against the unit and it should be covered if you have war coverage on it. So most things are covered. There are companies that offer, it’s kind of like an agreed value policy, so if we say it’s worth $25,000. If you have a total loss, they’ll pay you $25,000 minus your deductible. Some policies say or we’ll replace it. That’s kind of the case. If you had a $1,500 unit at the time, like a Phantom of some sort, a DJI that’s maybe a $1,000 – $1,500 unit and you lose it, the insurance company has the option to go on to Ebay, buy you another one and ship it to you and you get a brand new one and they paid $600 for it. So you have to kind of watch the values, but vitally important if you get a bigger unit. Especially when you get into cameras. You are talking significant added expenses when you’re talking about cameras and the gimbal mount assemblies. Those things are almost more money than the unit itself.

So when you’re talking extra equipment, those things are typically scheduled on them. So you have the drone itself, the UAB, and then you have the camera equipment and then you’ve got any of the other stuff that goes along. And that can all be packaged in the insurance.

Enrico: What is your coverage as an insurance agent and broker helping drone operators get the right insurance. Do you cover one state or all 50 states or how can they contact you?

Sky: I cover 48 states. The contiguous states usually. I can’t do Canada. Alaska is very difficult without being in Alaska. Hawaii is tough. The U.S. pretty much cover anybody and the companies we work with will cover in every state too. So that’s not a problem. The only difference is there’s an application you have to fill out. They want to know your background. They kind of want you to be, some will ask if you’re a pilot. Some will ask if you have UAV hours. Because really what they are looking for more is what kind of experience you have flying a UAV. Your rate is going to be subject to what kind of experience you have. If you had a recent lost on an insurance claim, they really don’t want to take you on, so you want to have a clean record when you come in to them. It happens. We had one come in the other day. We could only get them liability only because they had had a loss before last year. So there’s options there. Same kind of coverage for everybody. Rates vary from state to state whatever’s filed. If you’re in New York or you’re in California, you can call in and say I need coverage and we can get you the same kind of stuff.

Enrico: Sky, this has been incredibly helpful. How does somebody contact you?

Sky: They can go to our website, skysmith.com and there’s a place there that actually says if you need a UAV or a drone quote click here and there’s an application to fill out or they can call me on my 800 number or email me. I carry my phone and email everywhere I go. We’re a small business. We’ve been at it for a long time. We’re pretty specialized, we do toys. For my homeowner’s I have to call my own agent because I don’t even do my own homeowner’s insurance. It’s pretty limited as to what I cover. That’s my dog walking in the background. We bring my dog to work. We’re a pretty personal service. You call the phone and I’m the one who answers it or my son. So to get a hold of us 800.743.1439 our 800 number. Sky at skysmith.com is my email and just send me a note and we’ll answer any questions we can. I do seminars around the country and one of those reasons is for educating people. For a few years I taught high school and I believe education is being prepared and knowledge before you get in is way better than jumping in. A lot of people say you can ask for forgiveness later. They’ve got to be prepared in this case.

Do it Right or Stay Home

You being on the legal side of it. Being prepared, have your contracts, don’t do it from the hip. Do everything, set it up as a business and it makes it a lot easier down the road and then it gets a lot better for you. And it makes you more professional for your customers. I think the customers that see you come out and you’ve got contracts, you’ve got insurance and you’re prepared, is a lot better than just pulling out of the trunk of your car and say here, I’m here.

Enrico: And we’re going to see this market mature and we’re going to see customers get educated and they’re going to start demanding more and you want to be on the front end rather than the back end of this market as it comes down the pipe.

Sky, I can’t thank you enough for being on the show today. We will see you at InterDrone. I’ll find you and we will certainly be sending some 333 exemption clients your way.

Sky: If you have questions, send me a note and I’ll be happy to answer them.

Enrico: This has been Enrico Schaefer for Dronelaw.pro radio and I have say that this is one of my favorite interviews I’ve done so far because this is a very common question – how do I get drone insurance?