Should the average enthusiast buy drone insurance?
I'm expecting it to be essential for commercial use, or if the drone was used in a busy area, but what if the drone was a collaboration between multiple people?
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This is a personal approach, so like all financial advice it's only worth what you paid for it.
If you have worked with the insurance industry in the past, you will likely have learned that good insurance companies pay out almost (if not more) money than they take in. This is because what the insurer is doing is taking the premiums and lending them out, much like a bank. So when you spend $100/yr across 10 years, and you get back a $1000 payout in the tenth year, the entire time the insurance company has been earning interest on the money you gave them. This 5-10% overhead is quite profitable when you have tens and hundreds of billions of dollars stockpiled.
The upshot is that insurance won't save you any money in the long-term, it only spreads the financial pressure of a decision across time. I only consider insurance worthwhile when the cost of throwing my hands up and walking away is unacceptably high. Put another way, I only get insurance when either required by contract or law (e.g. renters insurance or auto insurance), or when I cannot afford the consequences of not having the thing which is insured.
You'll have to decide for yourself the impact of losing your drone. If it's just a toy and you don't think you'll fly it again if you lose it, then maybe it's not worth the cost of insurance. If it's your livelihood and you can't afford to buy another one then insurance is a guarantee against catastrophic business failure.
Or if the amount of damage you could do with your drone could cause you to be personally liable for a ruinous amount, then you might want to protect yourself with insurance.
P.S. Drop a comment when you decide, I'd love to know how your reasoning went.
There may be regulatory variations by jurisdiction - as you haven't indicated a specific location, I've referred to UK regulations which I am most familiar with.
There are two insurance considerations - first party (where you insure your drone) and third party (where you insure against damage or injury to others.)
Third party insurance is a good idea (but not required in the UK) if you are flying anywhere you may affect someone else - this could be a person or their property. The potential medical or legal fees can be huge, so having protection against this is worthwhile. Some model aircraft organisations offer third-part insurance as part of their membership benefits - for example the BMFA.
However, your risk estimation will also consider what you are flying - a <250g toy is unlikely to cause major damage or injury compared to a 20kg scale model aircraft.
Whether you first-party insure depends on your own personal financial situation - and the importance you place on your aircraft. It is an unfortunate fact of the hobby that your aircraft might be damaged, even through no fault of your own.
As a side note, for storage purposes the drone may be covered by other services like home and contents insurance - although you may need to nominate high-value items in advance. You should check with your provider, where applicable.
As you expected, insurance is often required for commercial use. In the United Kingdom, third party insurance is required - the specifics of which are laid out in regulation (EC) 785/2004. I believe, at present, this is at least €1,000,000 per accident.
Insurance for the aircraft will depend on the operator. Larger companies might be able to accept the cost of replacing a few thousand pounds of drone every now and then, but a small photography business might be hugely reliant on their aircraft for their livelihood - making insurance worthwhile.
Insurance isn't much good for events that probably will happen sooner or later, like crashing a drone. The insurer will estimate how often it happens and how much it will cost, and adjust the cost of insurance to match, plus a bit so they make a profit and cover their admin costs.
Where it is useful is for events that are unlikely to occur but would be ruinously expensive if it did. Maybe you crash into a road and cause multiple cars to collide, leaving someone unable to work for the rest of their life or with large medical bills. Or maybe your crash causes a fire that burns down a large building. In either case, you'd be liable for millions, which would effect you for the rest of your life. Even if you just crash into a newish car and cause a small dent, you could be liable for a few thousand to fix it.
In these cases, the insurer spreads the risk over thousands of people and you all pay for it gradually over several years, so it doesn't cost much to buy several millions of cover.
Here in the UK, the land owner of the school field where we fly (the County Council) requires us to have £25 million of cover and it costs about £25 per year, which seems like a great deal. I believe clubs that fly on Ministry of Defence land (i.e. military airfields) have a similar requirement.
You should have insurance for damage to people and property. This is less true for whoops but goes up exponentially with the size/weight/power of the drone.
Insuring the drone itself depends upon the value of the drone. Most people with a drone valued below $500 probably don't have insurance. Drones valued in the thousands of USD may be worth considering insurance - although I don't think this is common.
The AMA offers plans (as of today) with $25,000 medical and 2,500,000 liability or just $500,000 liability (USD).
I have paid for this in the past - I think I'm currently expired but haven't been flying around people or expensive property.