A number of aircraft parts have “timed lives” at which time they must be refurbished or replaced. Betterment arises where, following a loss and subsequent repair or replacement, the repaired or replaced part has a longer (newer) timed-life than the part replaced.
While the aim of the insurance policy is to return the aircraft to as close as possible to the condition before the loss, after the loss, there are occasions where a newer part has to be used.
An example illustrates how betterment might apply.
Assume, following a loss that a replacement engine is required that will cost GBP£25,000. The damaged engine had, prior to the loss, a 40% remaining timed life, effectively valuing the current value of the old engine at GBP£10,000.
In the event of a claim, the insurers would only offer GBP£10,000 towards the cost of the replacement engine, leaving the policy holder to pay the GBP£15,000 balance.
With a betterment policy, the full replacement cost would be paid for by the insurers.