You’ve just had a major engine problem that will take weeks for the repair facility to diagnose and resolve. You quickly learn the engine company will be happy to lease a “loaner” engine for a reasonable rate; all you have to do is sign on the dotted line. Here’s where it can get interesting. For example, your airplane is worth $3,000,000, you remove your engine worth $150,000 then replace it with a loaner engine worth $400,000.  You must now specifically address this increase in value under your policy or be faced with a potential shortfall.  These agreements usually require you to indemnify (pay back) the engine company for the full stated value of their loaner engine in the event of loss.  It is imperative the insurance proceeds will provide enough to cover the engine as well as the remaining value of your own aircraft.  Also, pay attention when you are responsible for insuring the loaner engine. You may need to cover it in-transit in which case you should verify your spare parts coverage limit and qualifications. The engine lessor often requires several specific insurance provisions all of which must be coordinated with your insurer before the work can commence. By now, it should be clear this can be a complicated transaction so be sure to discuss with us before you sign!