Computer insurance a matter of fine print

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It comes as a shock. The broken lock, the empty spot on the desk where your computer was sitting. The smashed car window, the laptop bag gone. The fire that turns the chips to silicon cinder, or even just the smoke that coats the circuit boards with enough carbon to short circuit the signal.

And let's not forget the processer in the pool problem or the overturned cup of coffee on the keyboard.

Whatever the cause of the loss or damage, it's likely one of the next steps will be to call the insurance company.

That is where you find out the real damage.

If you are using the computer as a business tool, rather than as a home computer, most companies say that should be a specific policy. They will refuse to pay out on the home and contents policy.

"You have got to be absolutely straight with insurance companies. There must be full disclosure," says Consumers Institute director David Russell.

"You can't argue omission. The contracts will include wording to the effect that you should disclose any other matters that may be relevant."

He says the definition of what is business use and what is private use can also get sticky.

If people are dissatisfied, they can always complain to the insurance and banking ombudsman - but you have to get back to work in the meantime.

A typical example of the policy is the Vero Maxiplan.

That allows laptops or computers in a home office to be covered in a home and contents policy as long as the total contents value in the home is under $10,000. Go over that limit and you need a business insurance policy, specifying each item insured.

If you are using a corporate laptop, the home insurer will ask first whether that machine is covered under the employer's policy.

Even if it is covered by the home insurance, the next point of contention will be whether the policy is for indemnity or full replacement.

"If it is indemnity, you will probably find that a laptop loses value very quickly," says Russell.

Indemnity means, in the words of the Vero website, 'the item's current value allowing for its age and condition at the time of the loss or damage'.

The AMP site adds a further plain English explanation: "In other words, you receive enough to buy a second-hand item of the same age and in the same condition."

Sounds good, especially when you know that AMP is reselling Vero policies under its own brand.

A Vero spokeswoman says the indemnity value is set by underwriters based on research and analysis.

For them, a laptop is a laptop.

"The operating system and manufacturer is irrelevant," says Vero.

But it is not irrelevant to the buyers.

"Some models hold their value better than others, and the price you would need to pay on auction site Trademe for a secondhand Apple Mac laptop is likely to be higher than the insurance company will pay out.

"Our research is more complex than Trademe," says the Vero spokeswoman.

David Russell says sometimes market value isn't complex at all.

"I would have thought Trademe was a real guide to market prices. You have a willing buyer and a willing seller," says Russell.

Full replacement policies are usually only available for laptops under a year old. Such computers are inherently fragile, and they become outmoded very fast. They are also highly stealable.

"You need to read the small print very carefully, to see whether it is an indemnity policy or a replacement policy," says Russell.

He says people must read the small print closely, and not expect any leeway from the insurers.

"The higher the risk, the less likely they are to be lenient," he says.

Replacement policies will usually involve getting a chit for the replacement item from a major retailer.

That is because the insurance companies, as volume purchasers, are able to negotiate sharp discounts.

People earning their livelihood from their laptop may also consider other forms of insurance.

It is usually good policy to factor an extended warranty into a laptop purchase - it can be a big ask to expect them to last three years of solid use.

However, extended warranties are about mechanical or electrical problems, and probably won't cover fire and theft.

There are policies available which cover all loss or damage to mobile computers, including fire, burglary, theft and accidental damage for up to three years.

Expect to pay about $600 for such a policy for a basic laptop, and $1000 to cover a more expensive machine.