Your Digital Media May Not be Insured

Over the past few months, I’ve been making a concerted effort to bolster my personal and financial affairs, including my insurance portfolio. Diving into the details of insurance can be intimidating, and insuring a home and its contents can be an eye-opening experience. Did you know that your home may not have adequate (or any) flood insurance if you don’t explicitly request (and pay) for it? The same is true for damage from sewer backups or a myriad of other events. What most surprised me, though, is how poorly covered some home electronics, computers, and media are, by default.

For example, a high-end laptop or computer alone could easily exceed the $2,000 limit some policies impose on computer hardware, software, accessories, and media. With my insurance company, I have an option to increase that limit (at a cost, of course) to $10,000 for all computer-related stuff before I’d have to look into riders for specific, itemized items.

$10K sounds like a big number, right? You should have no problem replacing all of your computer equipment with that. Unless you’re a geek or you have multiple people in your household with computers. Let’s say two adults in your house each have a reasonably-powered desktop computer. And you have a laptop. And your kids have your old computers. That’s maybe five computers right there that could easily cost 5K to replace, including monitors, printers, cables, and other peripherals. Do you any external storage drives? A few of those could easily run another $1,000. How about a home server or network storage device? Add any additional hard drives you’ve added to it. Another $1,000. Now let’s consider software: downloaded and box software can be inexpensive, but you probably have a lot of it. $30 here for each random downloaded app, $99 for many PC programs, $200 or more for each copy of Office…. It adds up quickly.

Now think about your media collection. If you have 200 DVDs at an average $20 replacement cost, replacing your DVD collection could cost you about $4,000. Many insurance companies will allow you to replace all physical media—magazines, books, movies, records, CDs, …all of it—without any limit. That was great in 1998. But now it’s 2010, and it’s likely that you purchase a lot of media now in digital form. And if it’s digital, it may be covered by the limited portion of your policy that includes computer hardware and software. The big question is, after considering all else, how much is left under your policy’s computer equipment ceiling to also account for your digital media?

You might be thinking that if it’s digital, you can just download it again. Can you? Some services will let you do that, while others will not. There are stories of Apple being accommodating for people who have lost their media libraries, but their terms explicitly exempt them replacing anything that you’ve purchased and lost—so you may be out of luck if you’ve invested heavily in iTunes content. Or maybe you purchased digital audio books, but now you’re no longer a customer of that specific service. And if you purchased your music through an online music service that no longer exists, you’re out of luck.

Bottom line: in the event of a catastrophic loss, your digital media may not be adequately covered under your current homeowner’s policy. So what can you do to protect your media purchases?

  • Know your coverages. If you don’t know if—or to what extent—your digital media is protected by your homeowner’s policy, call your agent and ask.
  • Inventory your computer equipment, software, and digital media. The best way to estimate the value of your computer investments is to create a detailed inventory. There are numerous tools that can help you do this, such as Microsoft Access for Windows users, Delicious Library and Bento for Mac users, numerous online services, and pretty much any document or spreadsheet program. Whatever method you use, make sure there’s a copy of your inventory somewhere off site or in the cloud.
  • Consider a rider to cover specific computer equipment. If your general coverage ceiling for all things computer and digital doesn’t leave enough room to also cover your media purchases, consider making some room by adding a policy rider to specifically cover high-ticket items in your computer inventory. You will likely need to itemize the items requiring coverage, providing your insurance company with specific models, specs, and, in some cases, serial numbers. Your insurance company will probably charge an additional premium to cover these items.
  • Back up media to an off-site location. Backing up your media purchases to an external hard drive can protect your purchases from computer failure, but it might not provide adequate protection if you suffer a catastrophic loss of your home or its contents. So store your backup drive elsewhere—at work, in a climate controlled storage unit, at a friend or family member’s home. Or you could consider using one of the many available cloud-based backup services, but the cost for that could be significant since media files are often very large.

Insuring your possessions can be tricky, but living in a digital world adds complications that many consumers and even insurance companies themselves haven’t really thought through. Make sure you know if your digital media is covered by your insurance, and take the appropriate steps to protect it, if necessary.

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