Get the lowdown on insurance for your tech gadgets

Many students own a mobile phone or a laptop computer or both. These gadgets can cost a lot of money, especially to students who rely on an allowance from their parents. If they lose or damage the gadget, it can be quite painful on the pocket to get it repaired or replaced.

Even if they have bought the mobile phone on a contract, they have to pay the full price on the purchase of a replacement. These risks can be covered under an "all risk insurance policy".

All-risk policy

Although the policy is described as "all risk", the student should be careful to read and understand the risks that are actually covered, and, more importantly, to know what are not covered.

A typical policy covers the following events:

  • Accidental damage, i.e. physical damage to the gadget that occurs as a result of a sudden, unforeseen and unexpected event. The event must arise from a single identifiable incident.
  • Theft through forcible entry to buildings, residences and vehicles (must be locked).

I have seen a specific policy that covers the above perils and also the "loss" of the gadget. However, the definition of "loss" is not defined or explained on the website and there is no reference to the underlying policy. I suspect that the "loss" is likely to be restricted, as theft is covered only from locked premises or vehicles.

Perils and exclusions

This ambiguity shows the importance of getting a clear understanding of what is or is not covered.

In an insurance policy, there is a clause to state the perils that are covered. Perils are the cause of the loss. Examples of perils are fire, accident, explosion, flood or natural disaster.

The policy also states the exclusions, i.e. the perils that are not covered. For example, the policy may exclude a loss caused by intentional action by the owner.

Deductible

There may be a deductible applied to each claim, say $200. If there is damage to the gadget that cost $500 to repair, the claim payable is only $300 — after applying the deductible. Some policies use the term "excess" instead of "deductible" but they mean the same thing.

Replacement value

In the event of a claim, the compensation can be made on the basis of the insured sum, the replacement cost or the depreciated value. Most policies are likely to insure the gadget for the sum insured. If your gadget is one year old, the full sum insured is payable in the event of a total loss, even though the gadget might have depreciated in value.

If the cover is on replacement value, the compensation will be on the cost of replacing the damaged or the lost gadget. This replacement value may be higher or lower than the sum insured.

Period of insurance

If you buy a new laptop or mobile phone, the vendor may have arranged an all-risk cover for a period of one or two years. The premium is likely to be included in the purchase price of the gadget. This web link shows an example of the insurance that comes with the purchase of a HP laptop computer.

Premium

Another factor that the consumer should consider is the premium payable for the insurance. This is likely to be 10 percent of the insured sum for a cover of 12 months. The actual chance of a claim is probably lower than 5 percent, so the premium is rather high.

It may be better for the owner to be careful with the gadget or to take loss prevention measures, such as pasting a label on the gadget, so that the finder can report a found item to the owner.

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