Drones and Insurance: What You Need to Know

Drones are devices that are flown remotely by a person not occupying the aircraft. According to the International Risk Management Institute, Inc. (IRMI), the number of hobbyist drones and drones for commercial use are both increasing. As usage rises, so will the number of questions surrounding drones and insurance. The Claims Department at Rose & Kiernan, Inc. put together this resource on drones and insurance as an overview for you if you’re thinking about owning a drone for recreational or commercial purposes.

Common exposures for drones

Drones are aircrafts that do not carry passengers, but they do carry a lot of the same exposures on a smaller scale, says IRMI. These include:

• Bodily injury or damage due to collisions with other aircraft or drones
• First party or third-party damage or injury to people or property on the ground
• Damage to the drone
• Violation of another person’s rights when flying over private property

Drone regulations

Drones come in all shapes and sizes from microdrones and nanodrones to larger drones that can approach the size of a small airplane. As of December 12, 2017, the Federal Aviation Association (FAA) requires all drone owners to register each drone that weighs more than 0.55 pounds (8.8 ounces). Drones large than 55 pounds must register as an aircraft. There are two registration options depending on how the drone user wishes to fly that fall under the FAA’s Special Rule for Model Aircraft (Section 336) or the Small UAS Rule (Part 107). The chart below from IRMI breaks down the applicable rules.

In addition, according to the National Conference of State Legislatures (NCSL), 44 states have enacted laws addressing drones. They provide an overview of the state law landscape for drones by state. Also, check with your city or town to make sure that you are within legal parameters.

Recreational drones and insurance

The Insurance Information Institute, Inc. (III) recommends that anyone who purchases a drone of any size add an insurance review to their “pre-flight checklist.” This includes verifying your coverage, any exclusions, policy limits and deductibles. Also, note that following federal, state and local drone regulations are important, as not following them may result in loss of insurance coverage.

Here are some frequently asked questions (FAQs) on recreational drones and insurance:

• Does my homeowner’s insurance policy cover bodily injury or property damage? Most likely, yes. Within your homeowner’s or renter’s policy, there is a liability portion that covers bodily injury or property damage that the drone causes when it is operated by the drone’s owner, a family member or someone you’ve given permission to operate the drone. Note that your landlord’s policy will not cover these issues.
• What happens if my drone is lost or stolen? Drones can be purchased at a range of costs. Double check with your insurance broker to make sure that your homeowner’s insurance policy has enough coverage to replace your drone if it is lost or stolen.
• Will the liability portion of my homeowner’s insurance policy cover invasion of privacy? Most likely, and only if this invasion of privacy is unintentional.
• What if a drone crash lands on my car? A comprehensive auto insurance policy will cover any damage from fallen objects and disasters… including drones. If your drone damages another person’s car, this would be covered under your homeowner’s or renter’s insurance.

Note that liability issues when it comes to drones and homeowner’s insurance can be tricky. Some insurers are now classifying drones as aircraft and excluding them from liability coverage.

Commercial drones and insurance

Drones are being used in many industries including agriculture, communications, construction, energy, insurance, news and entertainment, photography, real estate, research, retail delivery and sports. Commercial (business) use of drones is more strictly regulated than recreational drone usage. In addition to other rules and regulations, the drone operator must be licensed, as required by the FAA. Also, note that commercial drones are not covered by personal insurance policies. Your insurance broker can work with you to make sure that you have the appropriate type and amount of drone insurance coverage.

Here are some frequently asked questions (FAQs) on commercial drones and insurance:

• Does my homeowner’s insurance policy cover my drone business? No. Most homeowner’s insurance policies include an aircraft liability exclusion. Even without this, there are various business exclusions that would eliminate coverage for your drone business. 
• Do standard commercial property policies cover drones? No. These policies do not cover aircraft, so any damage to the drone itself (hull exposure) would not be covered. In addition, commercial general liability (CGL) policies contain an aircraft exclusion that removes coverage for bodily injury and property damage connected with the insured drone owner.
• What types of business insurance can I purchase for my drone business?
  • A modified CGL policy – as of 2015, a CGL insurance policy can be amended to insure for drone liability exposure thanks to ISO drone insurance endorsements, according to Insurance Journal.
  • Aviation insurance – these policies cover both hull exposure and liability on a single form. Note that aviation policies usually do not include coverage for personal injury exposures such as trespassing or invasion of property, but the standard form can be modified to do so.
  • Businessowners policy and endorsements (BOP) are also an option for drone businesses.

It’s also important to note that because drones are a rapidly evolving technology, insurance parameters and legal regulations are rapidly evolving, too. The FAA website is a good resource, and of course, you can always ask your insurance professional. If you have any questions about drones and insurance, please contact Rose & Kiernan, Inc. here or by calling 800-242-2433.