Thinking about entering into an aircraft lease agreement? You’re not alone—many aircraft owners wonder, "Can I lease my aircraft to others or third parties?" The answer is yes!
But, like any important decision, it comes with responsibilities. Specific insurance policy terms and exclusions need attention when setting up a Part 91 lease agreement.
Contact an Aviation Attorney
Before you proceed, consult an aviation-specific attorney. They can draft a formal dry lease agreement tailored to your specific needs. Aviation-specific law firms understand both insurance contracts and the Federal Aviation Regulations (FARs), ensuring full compliance with legal and insurance requirements.
Be sure to designate pilot services separately from the aircraft lease itself. These agreements must be structured correctly to comply with Part 91 regulations, keeping the operations fully legal and insured properly.
Involving Your Insurance Broker
After your attorney prepares the dry lease agreement, submit it to your insurance broker. They will then send it to the underwriter for review. Of note, not all carriers permit dry leasing, so informing your broker early helps avoid policy restrictions or potentially the inability for your insurer to allow adding a dry lease.
Underwriting and Policy Costs
Most insurers allow dry leases but may limit the number of lessees that can be added. All dry leases, when approved by the insurer, will be subject to flat fees, typically ranging from $1K-$5K per lease. Some adjust costs based on the flight hours planned by the lessee.
Liability & Coverage Considerations
Once approved, the lessee is added as an additional insured on the policy. Lessees may also consider excess liability policies for additional coverages over and above the lessor’s policy limits. Keep in mind, these can be costly and difficult to obtain.
Aircraft Lease Agreements: Protecting All Parties
Liability limits are shared between the lessor and lessee. Work with your insurance broker to ensure adequate coverage. The lessee should receive a certificate of insurance confirming additional insured status and relevant policy terms.
Conclusion
Entering an aircraft lease agreement requires careful planning, legal compliance and insurance coordination. Partnering with experienced aviation attorneys and insurance brokers can simplify the process and help secure the best terms.