Summary: As portable electronic devices have become more and more popular, keeping them safe is a priority for many owners. Cell phones, iPads, e-readers and even laptops are taken most everywhere. As they are personal property, they are generally not covered for the most common perils that occur to them; being dropped, spilled on, lost, and other such hazards that are not named perils in the standard homeowner or tenant's policy. This article looks at some of the coverages available from different suppliers.

Topics covered:
Introduction
Limited lines
Coverages
Sample policy
Exclusions
Duties and settlement
General rules

Introduction

Electronics insurance is a specialty all its own. While there is an endorsement available for computer coverage for the homeowners form, it is not designed to protect equipment such as smart phones against all hazards. There are a myriad of different hazards that electronic devices are exposed to. Common hazards and problems that can be covered by specialty insurance include liquid damage, battery failure, won't power on, camera failure, touch screen malfunction, cracked screen, headphone jack problems, home button failure, charging port problems, software issues, theft, power surge by lightning, vandalism, fire, and other similar perils.

Limited Lines

Coverage for electronic devices is true insurance coverage, and not just a warranty. The policy extends beyond the warranty and provides different coverage. As such, many states consider this limited lines insurance, and many require some sort of limited lines license in order for representative to sell and service such coverage. See Portable Electronics Insurance Chart.

Coverages

There is a broad variety of carriers and coverages; many do not cover theft and loss since dropping and breakage are more common occurrences; others do cover theft and loss; it depends on the carrier. Many provide coverage for multiple types of electronic equipment including tablets, laptops, iPads, eReaders and other portable electronic equipment. Some provide coverage only for newly purchased phones while others provide coverage for a phone purchased any time. Many charge a monthly fee and require the owner to sign up for a plan for a period of time.

Sample Policy

The Worth Ave. Group provides an electronic device policy underwritten by Allmerica Financial Benefit Insurance Company, http://www.worthavegroup.com/product/iphone-insurance/.

There are two forms: one covers accidental damage, the other does not. The one policy covers direct physical loss caused by accidental damage, theft, burglary, robbery, fire, flood, vandalism, natural disasters, and power surge due to lighting to products listed on the declarations page. “Accidental damage” is not defined, therefore making the policy quite broad. With accidental damage covered, if the insured drops his phone and damages it, there is coverage. Without accidental damage, the named perils are rather limiting. This allows an insured to cover more than one piece of equipment, for example a cell phone and laptop.

Like any insurance policy, property is covered only during the policy term and is covered worldwide. There must be insurable interest in the property, and no more than an insured's insurable interest will be covered. Therefore, the limit of insurance must be the replacement cost of the property being insured.

Exclusions

Excluded property is video games, DVDs, CDs, MP3 files, ring tones, contact lists, video screen savers, headphones, applications, programs, pictures, video or audio files, and data. The intent of the policy is to provide coverage for the basic equipment, not programs that can be used on the equipment.

Excluded losses include corrosion, rust, changes in humidity or temperature, or cosmetic damages. Corrosion and rust are general wear and tear; cosmetic damages are damages that do not impede the normal operational function of the equipment; scratches on the screen are not covered as the phone or tablet is still usable with most scratches. Dishonest acts are not covered, but there is a unique exception: if the loss is caused by an act arising out of a pattern or domestic violence and the perpetrator is criminally prosecuted, this exclusion does not apply to an otherwise covered insured who did not cooperate in the loss. For example, if an abusive spouse steals and sells the insured's cell phone and tablet, there is coverage for the loss as long as the individual is prosecuted.

Electrical breakdown is excluded unless caused by lightning. If a fire results, the loss by fire is covered. As always, intentional acts are excluded, as is mechanical breakdown. Equipment wears out over time, and this policy is not designed to cover those everyday events. However, if the equipment breaks suddenly because it was dropped, that would be covered, as is damage by ensuing fire or explosion. Wear and tear is excluded, along with gradual deterioration, insects, or vermin.

Nuclear hazard, including damage caused directly or indirectly from nuclear reaction, radiation, or radioactive contamination, is excluded. Resultant fire damage is covered. Loss caused by war, invasion, seizure, or other warlike acts by a military force are excluded.

The next two exclusions are for theft from an unattended vehicle or unexplained loss or mysterious disappearance. This is because these two items often speak to negligence of the insured and not just a fortuitous loss. Leaving equipment in the car is an invitation for thieves to try to take it. Unexplained loss or mysterious disappearance, unless the insured has valid reason to suspect theft, simply indicates the insured put it down and forgot about it somewhere. The carrier expects the insured to be responsible for his property and equipment.

Duties and Settlement

Duties in event of a loss pretty much follow the standard duties of an insured. Report the loss or damage within ninety days, notify police if loss is theft, vandalism, or fire; protect property from future loss; provide proof of ownership; allow examination under oath; submit proof of loss form within sixty days of request from company; and contact company agent prior to having repairs completed so that repair facility can be approved.

Like many policies, losses are settled at replacement cost but no more than the lesser of the cost to repair, cost to replace based on refurbished item, cost to replace based on item of like kind and quality, and the coverage amount listed on the declarations page. Identical items may not be available due to the rapid upgrading of technology; if that happens, settlement is the lesser of the cost of a new or refurbished article similar to the one that was destroyed with comparable quality and usefulness. Payments are made within thirty days of settlement. The loss of a pair or set is settled at the carrier's option to either repair or replace to restore the set to its value before the loss, or to pay the difference in the value of the property before and after the loss. If the carrier pays to replace insured property, the carrier retains all salvage rights for the damaged property.

General Rules

The rules and conditions are straightforward: abandonment of property is not allowed, appraisal is available if the insured and carrier do not agree on the amount of loss or the value of the covered property, and as usual each party selects an impartial appraiser and the appraisers then select an umpire. Disagreements between the appraisers will be submitted to the umpire, and if two of the three parties agree to an amount that will be the amount of the loss. Assignment of the policy to others is not allowed without the carrier's written consent, and the benefits of the policy apply to the insured, not to anyone having custody of the property.

Cancellation at the request of the insured is processed on a short rate basis. If the carrier cancels the policy seventy-five days' notice will be given, and any premium refund will be on a pro rata basis. Once a policy has been in force for sixty days, the carrier may only cancel a policy for one of four reasons:

·Non-payment of premium

·Fraud or material misrepresentation made by the insured in obtaining the policy or submitting a claim

·Violation of policy terms and conditions by the insured

·Substantial change in the risk since the inception of the policy

Similarly the carrier may nonrenew the policy with notice to the insured sixty days before the expiration of the policy or anniversary date if the policy is written for more than one year. Grounds for nonrenewal are

·Failure to pay the renewal premium

·Fraud or material misrepresentation in obtaining the policy or submitting a claim

·Violation of terms or conditions of the policy by the insured

·Substantial change in the risk since inception of the policy

The policy has a standard antifraud statement: coverage will not be provided if the insured misleads, willfully conceals, misrepresent material information, or attempts to defraud or lies to the carrier either before or after a loss. However, unintentional errors will not affect coverage. If the insured makes an honest mistake on the application, or transposes a model number, that is OK. It is when the insured deliberately tries to insure something he does not own, or is not worth what he states, or states that something was damaged when it was not, among other acts, that coverage is denied due to misrepresentation or fraud.

Standard subrogation and suit clauses apply. Various states allow varying amounts of time for an insured to file suit, varying from one to ten years. The policy allows twelve months other than the states listed in the following table.