Among the monumental cultural shifts to have occurred in rapid succession over the past few years—from the domination of social media to the rise in remote work to every single restaurant using QR codes instead of menus—none signal the future so much as the widespread adoption of drones. Used both commercially and recreationally, unmanned aircraft vehicles (UAV), a.k.a. drones, are no longer just a science fiction trope. In fact, with some 320,000 drones registered in the United States, drones have the potential to revolutionize a range of industries, including real estate, agriculture, shipping, and more.
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But as with other burgeoning markets, such as cannabis and cryptocurrency, drone prevalence has accelerated faster than the rest of the world. And while drones are cool and very promising, there are still many unknowns, including how our society can use them safely, respectfully, and productively. Anything new and innovative invites some risk, of course. But the risk exposure for drones—with their expensive equipment, specialized software, and possibility of causing catastrophic loss–makes drone owners especially vulnerable to potentially devastating financial payouts.
To guard against these losses, drone insurance and other policies are essential—though not federally mandated. Still, if you intend to use your drone for work, anyone you do business with will request a certificate of insurance to ensure you can cover losses if anything goes wrong. It’s also the responsible and prudent thing to do when you operate a flying aircraft. The good news is, drone insurance is slowly but surely catching up with the particular needs and application of drones. With their increasing popularity among hobbyists and professionals alike, drone insurance underwriters are gradually able to rely on drone-specific risk management models to determine the most appropriate coverage for drone owners. Up until now, underwriters were using risk models borrowed from manned aircraft, which led to overly expensive and inflexible premiums. The shift has allowed drone insurance to be both better designed and less costly.
Who needs drone insurance?
Once you start exploring the world of drones, you’ll hear all about the amazing future possible uses of these high-tech flying wonders. But as regulations, licensing, and other practical issues are being worked out in real time, everyday business uses of drones remain mostly experimental. Even drone use among big-name companies such as Amazon, FedEx, and UPS (who all have FAA clearance to operate drone delivery services) is limited.
However, now that drones have come down in price and the technology behind them has become more reliable, drones offer small business owners unique and lucrative opportunities–especially those who typically use helicopters or other light aircraft to take aerial photos, survey remote areas, and find people lost in the wilderness. Drones offer many advantages over helicopters because they’re less expensive, require no human on board, have easier licensing requirements, can go where helicopters can’t, and are way less noisy. Here are a few of the industries currently using drones the most:
- Commercial photographers. Drones are cheaper and easier to use for movies, sporting events, TV, weddings, concerts, etc.
- Real estate photographers. Yes, this is commercial photography, but for anyone obsessed with the aerial property photos on Zillow, you can thank drones.
- Farms. Drones can carry supplies, drop pesticides and water, and deliver crop reports.
- Construction. On construction sites, drones can provide aerial surveys, perform inspections, and travel into places that aren’t safe for people.
- Search and rescue. Public safety organizations use radar-equipped drones to locate people and drop supplies.
How to do a risk assessment for drone insurance?
Originally built for military use, drones are a truly a miracle of modern engineering. Sort of like flying robots, drones handle all of the tricky flying duties pilots typically have to study and practice, such as thrust, balance, and altitude. With drones, an operator controls flight using a joystick and a GPS system from a tablet or smartphone. The drones’ rotors allow it to climb, hover, and move sideways, while built-in cameras allow the controller to see where it’s going. Their singular design and purpose mean the drone risk profile is unlike other remotely operated machines, encompassing everything from general liability to cyber security. Here are some of the risks that are unique to drones:
Cyber security. Drones run on software, store sensitive information, and rely on WiFi or radio signals—all of which make them vulnerable to attacks by cybercriminals. Hackers could illegally intercept data, gain control of the aircraft, and do some serious harm to both people and property.
International exposure. Drone companies who conduct research and development in countries that are outside of FAA regulations. These businesses need to ensure their insurance extends to foreign operations.
Liability risks. As regulation increases in the drone industry, the possibility of costly liability claims is going up. Drone manufacturers are at risk of product liability. Businesses and operators could be liable for property damage, bodily injury, and financial damages.
Privacy issues. Not everyone loves a drone, especially if it flies away with photos of your private wedding. Privacy lawsuits are a serious concern to drone operators.
Regulatory challenges. Drone regulation and the legal landscape around drones is still a work in progress. Early adopters of drones should prepare for shifts in rules and regulations.
What does drone insurance cover?
While the FAA doesn’t require drone owners to have insurance, the agency limits and regulates commercial drone usage under the Small UAS Rule Part 107. The agency requires all drones weighing over 55 lbs to be registered, whether you’re using it recreationally or commercially. If you’re planning to use your drone for your business, the FAA requires you to have a Remote Pilot Certificate, as well. State and local laws put further restrictions, requirements, and penalties for non-compliance on drone operators. In addition to standard business insurance, such as Errors & Omissions (E&O) and Directors & Officers (D&O), these are some of the key insurance policies drone owners should purchase to effectively manage risk and cover liability and property concerns:
Commercial drone general liability insurance. This policy covers expenses associated with accidental bodily injuries or property damage caused to third parties while operating your drone. In general, liability limits typically start at $500,000 but you might want to go with a $1 million limit, since the price differential is small and the cost of legal defense can be very expensive. General liability also covers invasion of privacy claims, which is critical since it’s easy for drones to accidentally capture footage or information.
Commercial drone hull insurance. Commercial drone hull insurance pays for damages to the aircraft incurred during business operation. This type of policy is often bundled with aviation liability insurance. However, if you have a less expensive drone model under $1,000, for example a DJI, you may be able to get by self-insuring your drone and repairing it yourself instead of purchasing pricey hull insurance.
Payload insurance. The most expensive part of the drone is usually the on-board equipment, such as cameras, LIDAR lasers, and other gear. These “payload” items attach to the drone, but they’re not covered by hull insurance if they are damaged or lost. When you talk to your licensed insurance broker, be specific that you want to insure the payload.
Commercial property insurance. Commercial property insurance protects important stuff like equipment, furniture, and inventory, plus it covers theft and loss of earnings.
Non-owned aircraft liability. If you’re working with someone else who’s operating the drone and something goes wrong, this insurance protects you against claims of bodily injury and property damage.
Cyber liability insurance. Cyber liability insurance will pay for the costs connected to cyber attacks on your drone or computer infrastructure, including data breaches.
How much does drone insurance cost?
The cost of drone insurance depends on a few factors, including the type and size of drone you use in your operations. Underwriters will also look at things such as what you use the drone for, how much experience you have operating drones, your accident history, and where you’ll be operating it to determine the most appropriate coverage for your specific needs. You can expect to pay lower premiums if you have a clean record and no recorded accidents in the past five years, operate your drone in protected areas such as construction sites or farms instead of busy metropolitan areas, and use it for public safety versus commercial photography.
Drone insurance overview
Drones are becoming increasingly popular, both for personal and commercial use. But as with any new technology, there are some risks involved. That’s why it’s important to make sure you’re properly insured before you take to the skies. Based on the above drone insurance costs, coverages, and companies, take your time in customizing the right policy for your company.
