Aviation insurance is insurance coverage geared specifically to the operation of aircraft and the risks involved in aviation.

Aviation insurance policies are distinctly different from those for other areas of transportation and tend to incorporate aviation terminology, as well as terminology, limits and clauses specific to aviation insurance.

Aviation insurance provides coverage for hull losses as well as liability for passenger injuries, environmental and third-party damage caused by aircraft accidents.

Aviation insurance is divided into several types of insurance coverage available.

Public liability insurance: This coverage, often referred to as third party liability covers aircraft owners for damage that their aircraft does to third party property, such as houses, cars, crops, airport facilities and other aircraft struck in a collision. It does not provide coverage for damage to the insured aircraft itself or coverage for passengers injured on the insured aircraft. After an accident an insurance company will compensate victims for their losses, but if a settlement can not be reached then the case is usually taken to court to decide liability and the amount of damages. Public liability insurance is mandatory in most countries and is usually purchased in specified total amounts per incident, such as $1,000,000 or $5,000,000.

Passenger liability insurance: Passenger liability protects passengers riding in the accident aircraft who are injured or killed. In many countries this coverage is mandatory only for commercial or large aircraft. Coverage is often sold on a "per-seat" basis, with a specified limit for each passenger seat.

Combined Single Limit (CSL): CSL coverage combines public liability and passenger liability coverage into a single coverage with a single overall limit per accident. This type of coverage provides more flexibility in paying claims for liability, especially if passengers are injured, but little damage is done to third party property on the ground.

Ground risk hull insurance not in motion: This provides coverage for the insured aircraft against damage when it is on the ground and not in motion. This would provide protection for the aircraft for such events as fire, theft, vandalism, flood, mudslides, animal damage, wind or hailstorms, hangar collapse or for uninsured vehicles or aircraft striking the aircraft. The amount of coverage may be a book value or an agreed value that was set when the policy was purchased.

The use of the insurance term "hull" to refer to the insured aircraft betrays the origins of aviation insurance in marine insurance. Most hull insurance includes a deductible to discourage small or nuisance claims.

Ground risk hull insurance in motion (taxiing): This coverage is similar to ground risk hull insurance not in motion, but provides coverage while the aircraft is taxiing, but not while taking off or landing. Normally coverage ceases at the start of the take-off roll and is in force only once the aircraft has completed its subsequent landing. Due to disputes between aircraft owners and insurance companies about whether the accident aircraft was in fact taxiing or attempting to take-off this coverage has been discontinued by many insurance companies.

In-flight insurance: In-flight coverage protects an insured aircraft against damage during all phases of flight and ground operation, including while parked or stored. Naturally it is more expensive than not-in-motion coverage since most aircraft are damaged while in motion.

In the event of an accident /or incident, whether of a minor or serious nature involving a aircraft and resulting in but not limited to:

1. Loss of or extensive damage to the aircraft, including engines;

2. Spares and ground equipment;

3. Death of or bodily injury to passengers;

4. Death of or bodily injury to third parties i.e. to persons other than passengers;

5. Damage to property of Third parties;

6. Baggage;

7. Cargo and mail;

8. Personal injury

These apply to claims covered by insurance under Aviation Insurance policy.