Aircraft Leasing and Insurance Protections

In aircraft leasing the insurance protections will oblige the lessee is mandated to maintain both hull and liability insurance.

The Hull insurance is paramount as it covers the physical damage to or total loss of the aircraft, thereby protecting the lessor’s asset value and it is typically aligned with the higher of market value or an agreed value, which might reflect a premium over the lessor’s book value during the lease period.

Liability insurance encompasses broader legal liabilities such as third-party, passenger, and baggage legal liabilities and acts to ensure that the lessor and other relevant parties are shielded from potential legal claims and liabilities arising from the operation of the aircraft.

There is commonly conditions regarding then the continuity of coverage such as stating the lessee must continue to include indemnitees as additional insureds for a designated period, even following a sale, assignment, or transfer of the lease.

This ensures that the protection against potential liabilities or losses extends beyond the immediate lease term, offering a safeguard to the lessor and other involved parties and often insurance continuation clauses are in place to ensure that the insurance coverage remains intact and unaltered for a reasonable period, typically at least 30 days, after any notification of insurance policy changes, cancellations, or issues related to premium payments.

The requirement for the lessee to maintain insurance coverage without alteration for the benefit of additional insured parties is underscored by clauses mandating the lessee to amend the insurances, as needed, to maintain the scope and level of cover.

This ensures that the interests of the lessor, owner, and other indemnitees are protected throughout the lease term and the certificates of insurance and the broker’s letter of undertaking are instrumental in evidencing compliance with these requirements, affirming that the insurances are procured through reputable brokers and insurers recognized in leading international insurance markets.

The lease is asset protection in favour of the lessor and defining these protections and insurance requirements allows the lease agreement to mitigate risks and protect the interests of the lessor against unforeseen events and liabilities.

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