Do You Need Drone Insurance? Coverage Types and When Its Required

Do You Need Drone Insurance? Coverage Types and When It’s Required

Drone insurance isn’t legally required by the FAA for Part 107 operations, but operating without coverage exposes you to catastrophic financial risk. A single incident—a crash into a car, injury to a bystander, or damage to property—can result in lawsuits costing hundreds of thousands of dollars. Understanding drone insurance requirements and options is essential for protecting your business and personal assets.

Is Drone Insurance Legally Required?

FAA Part 107 regulations do not mandate insurance for commercial drone operations. However, several situations effectively require coverage:

When Insurance is Mandatory

• Client contracts: Most commercial clients require proof of liability insurance before allowing operations
• Job site requirements: Construction sites, events, and property managers typically mandate $1-5 million coverage
• Certificate of Insurance (COI): Many contracts specify exact coverage amounts and require you to name them as additional insured
• Government contracts: Federal, state, and local government work almost always requires insurance
• Airspace authorizations: Some property owners and facilities require proof of insurance before granting access

When Insurance is Strongly Recommended

Even without contractual requirements, insurance is critical for:

• Any commercial operations
• Flying over or near people or property
• Operating expensive drone equipment
• High-risk operations (near water, structures, vehicles)
• Protecting personal assets from liability claims

Types of Drone Insurance Coverage

1. Liability Insurance (Third-Party Coverage)

This is the most critical coverage for drone operators. Liability insurance protects you when your drone causes damage or injury to others.

What it covers:

• Bodily injury to people on the ground
• Property damage (cars, buildings, equipment)
• Legal defense costs
• Settlements and judgments
• Medical expenses for injured parties

Typical coverage amounts: $1 million, $2 million, or $5 million per occurrence

Cost: $500-2,500 per year depending on coverage limits and operations

Example claim: Your drone loses signal and crashes through a car windshield, causing injuries. Liability insurance covers medical bills, vehicle repairs, and legal costs.

2. Hull Insurance (Physical Damage to Your Drone)

Hull insurance covers damage to your own drone equipment.

What it covers:

• Crash damage to drone
• Equipment loss from flyaways
• Theft of equipment
• Fire or weather damage
• Water damage (some policies)

Coverage options:

• Agreed value (insured for specific declared amount)
• Actual cash value (depreciated replacement cost)
• Replacement cost (full replacement with new equipment)

Deductibles: Typically $250-1,000 per claim

Cost: Usually 5-15% of equipment value annually

Example claim: Your $15,000 drone experiences a motor failure and crashes into a lake. Hull insurance covers replacement of the lost equipment minus your deductible.

3. Personal Injury Coverage

Covers you and your crew for injuries sustained during drone operations.

What it covers:

• Medical expenses from operational accidents
• Lost wages due to injury
• Accidental death and dismemberment

Cost: Often included in commercial policies or available as add-on

4. Professional Liability (Errors & Omissions)

Protects against claims of professional negligence or failure to deliver services.

What it covers:

• Failure to capture required footage
• Missing critical inspection details
• Errors in data processing or analysis
• Breach of contract claims
• Copyright or privacy violations from footage

Cost: $500-2,000 per year

Example claim: You’re hired to inspect a roof and miss damaged areas. The client sues when the roof fails, claiming your inspection was negligent.

5. Non-Owned Liability

Covers operations when you’re flying drones you don’t own (rentals or client equipment).

What it covers:

• Liability when operating rented drones
• Operations with client-provided equipment
• Temporary use of borrowed drones

Coverage Limits: How Much Insurance Do You Need?

Minimum Recommended Coverage

For most commercial operations:

• Liability: Minimum $1 million per occurrence
• Hull: Full replacement value of your equipment

Industry-Standard Requirements

Common client requirements by industry:

• Real estate photography: $1 million liability
• Construction inspection: $2-5 million liability
• Film and television production: $5-10 million liability
• Utility inspection: $5 million+ liability
• Public events: $2-5 million liability
• Government contracts: $2-5 million liability

Umbrella Policies

For higher-risk operations or larger contracts, umbrella policies provide additional coverage beyond base limits. These typically add $1-5 million in coverage above your primary policy.

What Drone Insurance Typically Excludes

Standard policies usually exclude:

• Intentional violations of FAA regulations
• Operations outside Part 107 authorization
• Flying under the influence of drugs or alcohol
• War, terrorism, or illegal activities
• Operations in prohibited airspace without authorization
• Damage from wear and tear or maintenance issues
• Privacy invasion lawsuits (require separate coverage)
• Data breaches or cyber liability (requires separate policy)

Cost of Drone Insurance

Annual premiums vary based on multiple factors:

Factors Affecting Cost

• Coverage limits: Higher limits = higher premiums
• Type of operations: Inspection work costs more than real estate photography
• Equipment value: More expensive drones = higher hull insurance costs
• Experience level: New pilots pay more than experienced operators
• Claims history: Previous claims increase rates
• Geographic location: High-risk areas (urban, near airports) cost more
• Annual revenue: Higher-earning businesses pay more

Typical Annual Costs

• Basic liability ($1M): $500-1,500
• Liability + Hull: $1,500-3,500
• Comprehensive commercial package: $2,500-5,000+
• High-risk operations (film, utilities): $5,000-15,000+

On-Demand vs Annual Policies

Annual Policies

Best for: Regular commercial operators

Pros:

• Lower per-flight cost
• Continuous coverage
• No gaps in protection
• Simpler for client COI requirements

Cons:

• Higher upfront cost
• Paying for coverage even when not flying

On-Demand (Per-Flight) Policies

Best for: Occasional operators or specific high-value jobs

Pros:

• Pay only when you fly
• Adjust coverage per job
• Lower commitment for part-time operators

Cons:

• Higher per-flight cost ($100-500 per day)
• Must purchase before each operation
• Coverage gaps between policies
• Less suitable for regular commercial work

Top Drone Insurance Providers

Specialized drone insurance companies include:

• SkyWatch.AI: On-demand and annual policies, instant COI generation
• Thimble: On-demand coverage, pay-by-the-hour options
• Skywatch: Comprehensive commercial policies
• Avion Insurance: Tailored commercial UAV coverage
• BWI: Commercial aviation insurance including drones
• Global Aerospace: Large-scale commercial operations

Traditional business insurance carriers (State Farm, Nationwide, Travelers) also offer drone coverage, often as add-ons to existing business policies.

Certificate of Insurance (COI) Requirements

Most clients require a Certificate of Insurance before you can operate. The COI must show:

• Your insurance carrier and policy number
• Coverage types (liability, hull, etc.)
• Coverage limits ($1M, $2M, etc.)
• Policy effective dates
• Client listed as “additional insured” (if required)
• Confirmation that coverage applies to drone operations

Most insurers can generate COIs instantly through online portals.

What Happens if You Operate Without Insurance?

Operating without insurance exposes you to:

Financial Risks

• Personal liability for all damages and injuries
• Legal defense costs (often $50,000-200,000 even if you win)
• Potential bankruptcy from major incidents
• Loss of personal assets (home, savings, vehicles)

Business Risks

• Inability to accept most commercial contracts
• Loss of client trust and reputation
• Exclusion from job sites and events
• Limited growth opportunities

Filing a Claim: What to Expect

If an incident occurs:

1. Immediately notify your insurer: Most policies require reporting within 24-72 hours
2. Document the scene: Photos, witness statements, incident reports
3. Preserve evidence: Don’t repair or dispose of damaged equipment
4. Cooperate with investigation: Provide flight logs, weather data, maintenance records
5. Don’t admit fault: Let the insurer handle liability determinations

Claims processing typically takes 30-90 days depending on complexity.

Tips for Reducing Insurance Costs

• Maintain Part 107 certification: Uncertified operators pay significantly more or can’t get coverage
• Complete additional training: Safety courses can reduce premiums
• Build experience: Rates decrease as you gain flight hours without incidents
• Increase deductibles: Higher deductibles lower premiums
• Bundle policies: Combine liability and hull coverage with one insurer
• Maintain clean claims history: Avoid small claims; pay minor damages out of pocket
• Use multiple quotes: Compare at least 3-5 insurers
• Join industry associations: AMA, AUVSI, or other groups may offer member discounts

Key Takeaways

While not legally required by the FAA, drone insurance is essential for commercial operations. Liability coverage protects against claims from property damage and injuries, while hull insurance covers your equipment. Most clients require proof of insurance before allowing operations, typically $1-5 million in liability coverage. Annual policies cost $1,500-5,000+ depending on coverage limits and operation type. On-demand policies work for occasional operators but cost more per flight. Operating without insurance exposes you to devastating financial liability. Don’t risk your business and personal assets—obtain appropriate coverage before your first commercial flight.