What is Computer Insurance?

Computer insurance is a form of insurance policy designed to protect computers from loss, theft, or damage. While a computer is likely not the most expensive piece of property a person might own, it is perhaps one of the most important. Computers are increasingly relied upon for many facets of communication and data storage. Losing a computer can cause significant headaches, some of which an insurance plan may be able to alleviate. There are many types of computer insurance, from basic warranty extensions to full coverage plans, and most can be tailored to an individual’s specific needs.

While not always marketed as insurance, warranty extension policies are one of the most frequently purchased computer insurance plans. Most of the time, computer manufacturers sell laptops, desktops, and other computer hardware subject to a limited warranty. Warranties are designed to protect the purchaser from bearing the repair or replacement cost of defective goods. A typical warranty period is anywhere from 30 days to one calendar year, but manufacturers frequently offer warranty extension programs to new computer buyers. For a small fee, purchasers can continue to protect against the risk of malfunction or defect for upwards of several years.

The majority of warranty programs do not cover accidental, or user-inflicted, damage. A warranty might replace a keyboard that cracked due to poor workmanship, for instance, but will typically not replace one that has had coffee spilled in it. In order to insure against external damage or loss, a computer owner often needs a separate insurance policy.

In some instances, homeowner’s or renter’s insurance may cover certain damage or loss to a computer owned by the policyholder. Theft is almost always covered, provided the computer was stolen from the insured house or apartment. Computers damaged by flooding, fire, or power surge on the property often are, as well. As computers grow increasingly mobile and portable, however, the chances of loss or damage within the home diminish. Insurance policies can often be adapted to cover loss or damage away from home, but this coverage may not be automatically included.

Some insurance companies offer policies geared specifically towards computers that can be purchased independently. These policies can be individual or corporate in nature, and can often be tailored to fit the computer owner’s needs. A company may elect to purchase full system insurance to cover the complete spectrum of network servers and all linked computers, while a college student may choose a minimal computer hardware insurance policy to protect a single laptop.

The only thing that many computer insurance providers do not offer is data insurance. While the files, photos, and documents stored on a hard drive can be some of the most important things to the computer owner, putting a price on data can be hard to do. Most data, too, is impossible or near-impossible to replace. Some policies may provide the cost of labor to rebuild corporate data sets or other important figures, but it is usually in a computer owner’s best interest to regularly back up data so that damage or loss to the hardware does not compromise the internal contents.

Different types of computer insurance come at different costs, usually based on a subscription for a fixed coverage period. Policy purchasers will typically pay a certain premium amount, on either a monthly or annual basis, to ensure coverage. Premium amounts are generally calculated as a factor of (1) the risk that the policyholder will suffer loss; and (2) the price of compensating for the loss of the insured property. Most computer insurance plans are structured on either a replacement or market value model. Should a loss occur, the insurance company must either pay to replace the covered computer outright, or reimburse the policyholder for the damaged machine’s fair-market value, provided damage is so great that repairs cannot be reasonably made.