Drone coverage will become a more pressing matter as UAV popularity gains momentum.
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Businesses, consumers: Should you insure your drones?

The use of unmanned aerial vehicles, more popularly known as drones, for commercial and recreational purposes has taken off, and it's left a few big questions up in the air – namely, who should be covered, and to what extent?

It's worth noting that as of this writing, the Federal Aviation Administration does not mandate coverage for UAVs. However, the soaring global market (estimations put its worth at around $21 billion by 2020) may soon necessitate more rigid parameters regarding UAV-related liability. 

Flying into new risk territory

A drone accident can result in any number of losses to the owner of the UAV."

Recreational use will most likely account for the majority of market growth in the next few years, according to MarketsandMarkets. As this happens, consumers will be quite literally flying into new risk territory. In terms of property damages, a drone accident can result in any number of losses to the owner of the UAV, but also to any asset that happens to be in proximity of the device. This includes private assets such as homes, lawn furniture and automobiles, but also commercial holdings, and perhaps most pressingly, critical infrastructure, i.e., power lines and traffic lights. 

Consider, for instance, the historic blackout that occurred in the summer of 2003. A single energy company's failure to trim a few branches near a high-voltage line sparked an outage that left approximately 50 million people without power in the U.S. and parts of Canada. The likelihood of a recreational user finding him or herself in the Kafkaesque position of having induced a nationwide power outage is slim, to say the least. Nevertheless, there are plenty of high-risk liabilities; for example, physical injuries caused by drone accidents or malfunctions, and privacy violations from the camera functionality. 

Likewise, some businesses such as Amazon, UPS and DHL are already using drones for commercial purposes. In order to qualify for commercial use of UAVs, businesses must file for Section 333 exemption from the FAA, allowable under the 2012 FAA Modernization and Reform Act. From there, however, commercial drone liability insurance is entirely optional. 

Gauging risk exposure

"Full liability coverage is the most prudent course of action."

Risk exposure for recreational use of drones is arguably diluted compared to commercial use, if for no other reason than that a business is likely to be responsible for multiple UAVs at a given moment. Drones may range in cost from a few hundred to a few thousand dollars, with the highest-end devices sometimes creeping into the tens of thousands of dollars. Business assets such as these, which are not easily replaced, should invariably be insured. 

Where liability is concerned, commercial drone insurance is generally recommended, but may or may not be a priority deadening on its use. Using drones for conservation or environmental monitoring purposes may have low exposure in regard to human safety. However, using drones for surveillance purposes at urban construction sites, for media coverage during public events or for product delivery in close proximity to people and their private property is inherently more risky. In such cases, full liability coverage is the most prudent course of action.   

Recreational drone use tends to be less risky, but the FAA requires registration of personal drones nonetheless. What's more, recreational use of drones has in fact resulted in serious accidents that necessitate expensive medical treatments. In 2015, a 16-month-old toddler toddler lost an eye after being hit in the face with a drone. This isn't to suggest that all drone users should run out and purchase a plan – however, it's worth considering, especially for drone UAV enthusiasts inhabiting cities and areas with dense populations. 

In conclusion: We recommend complete coverage for all commercial uses of drone, and for recreational users who will be operating their UAV in close proximity to other people and private property.