Short-Term vs Annual Policies: When Pay-As-You-Fly Makes Sense

Quick TL;DR

• Pay-as-you-fly (hourly or one-day) is cheaper if you fly very little.

• Annual policies beat on-demand once you pass the break-even flying hours. Calculate break-even as: annual premium ÷ hourly rate = hours per year.

• Non-monetary factors matter: COI needs, hull/payload cover, continuity, and admin overhead can make annual policies the safer, smarter choice even if math looks close.

Short-Term vs Annual Policies: When Pay-As-You-Fly Makes Sense

Executive summary

Do not pick insurance on gut or price alone. Pick it with simple math and plain risk sense. This post gives the exact break-even math you can use right now, real sample scenarios, the hidden costs that change the answer, and a quick decision guide so you stop guessing. 

If you want the one-sentence rule: if you fly more than the break-even hours for your profile, buy an annual policy; otherwise use hourly or one-day cover, provided the short-term option actually covers the payloads and COI the venue needs.

The basic formula (no drama)

Break-even hours per year = Annual premium / Hourly on-demand rate

Example worked step-by-step (Hobbyist):

1. Annual premium = $150.

2. Hourly on-demand rate = $10 per hour.

3. Break-even = 150 ÷ 10 = 15 hours per year.

If you fly more than 15 hours per year, the annual plan is cheaper. If less, hourly cover saves you money.

Read: How Crash Investigations Are Handled - From Claim to Repair

Real scenarios and exact break-even numbers

I ran practical, market-representative examples so you can copy-paste the numbers into your own sheet. These are illustrative; replace with the quotes you get.

Scenario A - Hobbyist

• Annual: $150

• Hourly: $10

• Break-even: 150 ÷ 10 = 15 hours/year

Scenario B - Occasional paid gigs

• Annual: $600

• Hourly (commercial hourly with liability + limited hull): $25

• Break-even: 600 ÷ 25 = 24 hours/year

Scenario C - Small commercial operator

• Annual: $1,200

• Hourly (on-demand with hull for commercial work): $20

• Break-even: 1200 ÷ 20 = 60 hours/year

Scenario D - High-end cinema operator

• Annual: $3,000

• Hourly (one-day or hourly for high-risk, high-coverage event): $40

• Break-even: 3000 ÷ 40 = 75 hours/year

Write these numbers down. They are your decision thresholds.

Two quick visuals you can use

(Do this in a spreadsheet: column = hours flown per year; compute cost_on_demand = hours * hourly_rate; plot cost_on_demand against fixed annual premium. The intersection is break-even.)

Important real-world caveats that change the math

Do not choose based on hours alone. These real-world factors can flip the decision fast:

1. Coverage scope

• Many on-demand policies only offer liability, not hull or payload scheduling. If your camera or LiDAR is expensive, hourly liability alone is worthless. Add the cost of short-term payload cover to the hourly rate before you recalc break-even.

2. Certificate of Insurance (COI) timing and wording

• Venues often require a COI days in advance with specific wording. Some on-demand providers can issue one-day COIs quickly; many cannot. If you cannot produce the exact COI, you lose the gig or accept contractual risk.

3. Administrative friction

• Buying hourly policies repeatedly wastes time and increases human error. Lost COIs, wrong effective times, and missed notices are the real reasons claims fail. Factor in roughly one hour of admin per booking into your hourly cost if you manage COIs yourself.

4. Continuity and claim risk

• Annual policies avoid coverage gaps. If you forget to buy short-term cover or a booking overlaps coverage times, you may be uninsured when a claim happens. If your business cannot tolerate that risk, pay for continuity.

5. Frequency variability and seasonality

• If your flying is seasonal, you might buy on-demand during slow months and an annual plan for busy months. Hybrid strategies often win.

6. Payload & data risk

• Data breach and cyber liability typically are not included in on-demand policies. If you handle client data, add cyber coverage cost to your comparison.

7. Renewal discounts and claims history

• Annual buyers build claims history and can gain better renewal pricing. Frequent hourly buyers may be seen as higher risk or have limited product options.

Break-even + admin example (real math)

Let’s compare Scenario B (Occasional paid gigs) with a realistic admin cost. Assume:

• Annual = $600.

• Hourly liability+COI = $25/hr.

• Admin time per booking = 1 hour at an implicit $25/hr admin cost (your time or assistant).

Adjusted hourly effective cost = $25 (policy) + $25 (admin amortized to the booking) = $50/hr equivalent.

Recompute break-even:

• 600 ÷ 50 = 12 hours/year

Conclusion: once you account for admin overhead, on-demand becomes expensive quickly. Be honest about your admin time—nobody pays you to file PDFs.

When pay-as-you-fly is the right call

Use short-term cover when:

• You fly very rarely (under your break-even hours) and you can reliably buy cover before each job.

• Your gear is low value or you do not need hull/payload insured.

• You need one-day COIs for single, low-risk events and the on-demand provider’s wording matches the venue.

• You cannot afford annual premiums and the risk is acceptable.

Examples: hobbyist who flies a handful of times a year; a wedding shooter doing one or two events a year and renting expensive cameras separately.

When an annual policy is the right call

Buy annual when:

• You approach or exceed break-even hours.

• You fly with expensive payloads regularly. Annual policies make scheduling and agreed-value easier and cheaper.

• You need coverage continuity and better underwriting terms (lower deductibles, better named-pilot language).

• Your clients require standard COI wording repeatedly and you want the admin headache gone.

• You operate a fleet or make reliable revenue from drone work.

Examples: part-time real estate shooter flying weekly; inspection company doing multiple short jobs weekly.

Hybrid strategies that actually work

You do not have to be binary.

• Seasonal hybrid: Annual policy for busy months; pause or reduce during off-season if your insurer allows mid-term adjustments.

• Annual liability + hourly hull for occasional expensive payloads. This keeps liability stable while you add hull only when needed.

• Monthly plans: Some providers offer monthly subscriptions—cheaper than annual if you fly intermittently but avoid multiple COI purchases.

• Event-only rider: Annual base cover and a one-day event rider when you need higher limits or special endorsements.

Always ask brokers for bundled or flexible options. Specialty brokers often create the hybrid product that saves money and risk.

Quick decision checklist - copy this and use it now

• How many hours do you fly per year? ______

• What hourly rate vs annual premium did you get? Fill formula: annual ÷ hourly = break-even hours ______

• Does hourly cover hull and payload? Yes/No ______

• Does hourly provider issue venue COIs in the exact wording required? Yes/No ______

• What is your admin time per booking (hours)? ______ — add this as a per-booking hourly cost to on-demand rate.

• Do you need coverage continuity? Yes/No ______

• Are your payloads expensive or unique and require agreed-value? Yes/No ______

If you answered “No” to the hull/payload or COI questions, lean to annual unless your flying hours are extremely low.

Final Advice

Stop guessing. Do the math. Add admin cost and coverage gaps into the hourly figure before you compare. If your break-even is under 30 hours and you fly more than that, buy an annual policy and sleep at night. 

If you fly less than the break-even and your on-demand provider truly matches your coverage needs (hull, payload, COI), then pay-as-you-fly will save you money.

Read: High-Value Custom Builds: Valuing & Insuring Custom Racing or Cinema Drones

Author

Svetlana - I am a Drone Insurance Writer and Researcher. I write about drone risk management and insurance for US pilots. Not a licensed broker. For policy advices contact a licensed insurance professional.