Aviation Insurance and Risk Management Practice Test

When the aircraft is a total loss, the insurer settles based on the insured value rather than the market value. If the airplane is completely destroyed or deemed a constructive total loss, the payout matches the amount the policy was written for (the sum insured or agreed value), up to policy terms. The market value of the wrecked aircraft isn’t what determines the settlement because there’s no usable asset left to sell. In partial loss scenarios, settlements are usually based on actual cash value or replacement costs for the damaged portion, and replacement-cost coverage aims to cover the cost to replace, again not simply the market value.