Insurance at 30,000 Feet: How Loss of Licence, PA Cover Can Protect Pilots

For pilots, their professional licence isn't just a piece of paper; it's their livelihood. An unforeseen injury, illness, or medical condition, even if temporary, can lead to the suspension or revocation of their licence, instantly halting their ability to earn. This is where Loss of Licence Insurance becomes an indispensable financial safeguard.

What is Loss of Licence Insurance?

Loss of Licence Insurance is a specialised type of insurance policy designed to provide financial compensation to professionals, predominantly pilots, if they become medically unfit to perform their professional duties. In essence, it acts as an income protection plan, replacing a portion of their lost earnings or providing a lump sum, in the event that a medical condition prevents them from flying.

"It typically covers scenarios where a pilot's bodily injury, illness, or disease sustained during the policy period results in temporary or permanent suspension of their flying licence. The policy can offer immediate or deferred benefits, depending on the nature and severity of the incapacity, providing crucial financial stability during a challenging period," says Adarsh Agarwal, Appointed Actuary, Digit Insurance.

Why Is It Important?

The most valuable asset as a pilot is his ability to fly. If that ability is compromised, this insurance provides a pre-determined income, safeguarding their financial stability.

"Loss of Licence policies are specifically designed to address the strict medical and regulatory requirements of the aviation industry. It ensures that the pilot doesn't become dependent on loans, savings depletion, or family support if they're unable to work due to medical reasons. In cases of permanent unfitness, the lump sum payout can provide the necessary capital for maintaining the same standard of living or starting a new career path," informs Agarwal.

Who Is It For?

This insurance is specifically tailored for pilots and other aviation professionals whose income is directly tied to their ability to maintain a valid and active licence. This includes commercial pilots, airline pilots, and pilots in various aviation roles.

Premium Cost

Several factors play a role in determining the premium cost, such as a pilot's age, their medical history, the sum insured they choose, and their flying status. It's also important to note that LoL insurance is frequently offered on a group insurance basis. These policies are often available through pilot organisations, employers, or workplace associations, which can provide more favourable and competitive pricing options to their members.

Coverages

Loss of Licence Cover: This policy provides comprehensive protection for pilots facing medical incapacitation. Coverages include Permanent Total Disablement (PTD), which pays 100 per cent of the sum insured if the pilot permanently loses their license due to most illnesses or diseases. For PTD due to Psychosis, Psychoneurosis, or Epilepsy, the policy typically pays a pre-defined sum insured. Temporary Total Disablement (TTD) usually offers 75% of net salary on a monthly basis if the pilot is temporarily grounded, providing crucial income replacement during recovery.

Personal Accident Cover: The PA cover includes Accidental Death/Dismemberment, paying 100 per cent of the sum insured if the insured suffers accidental bodily injury, resulting in death, loss of limbs and eyes, providing a lump sum for severe accidental outcomes. For example, "in the recent Air India crash, a pilot who held Digit's Loss of Licence insurance policy through the Federation of Indian Pilots (FIP), received a settlement of Rs 2.67 crore. Notably, this claim was settled within two business days," claims Agarwal.

Exclusions

There are some exclusions in the policy. However, keep in mind that terms may vary from policy to policy and insurer to insurer. "Pre-existing conditions are typically not covered, meaning any medical condition existing before the policy started is generally excluded. Typically, there is also a waiting period of 60-90 days for temporary medical unfitness. War & Military Operations leading to incapacity are also usually excluded. Claims arising from Self-inflicted Injury/Criminal Acts, such as intentional self-injury, suicide, deliberate exposure to danger, or any criminal act, are also excluded," says Agarwal.

Substance Abuse, specifically incapacity due to chronic alcoholism or habitual drug taking, is also excluded. Breach of Law/DGCA Violation by the pilot, Illegal/High-Risk Flying (e.g., racing, acrobatics) are a few other exclusions.