Insuring Electronic Devices
With the influx of new computers, tablets, and mobile devices into schools; districts need to realize they can face large liabilities for damage and theft of devices. Here’s a look at available insurance alternatives, with a focus on how device insurance from companies such as Worth Ave. Group can help.
A New Problem for Schools
Whether or not schools have a One-to-One Initiative, the flood of mobile devices into school districts creates a new financial liability. Districts now find themselves responsible for the care and maintenance of hundreds, if not thousands, of electronic devices. Since the early days of technology, most schools have paid for repairs and replacements out of their annual budgets. However, the sheer numbers of devices in schools today makes this impossible.
The scale of this financial liability is new for schools and districts. For example, in Burlington Public Schools in Massachusetts, they have been buying new iPads® each year until they reach a One-to-One implementation for the 2014-2015 school year. Their enrollment is currently 3,579 students. With average iPad replacement costs at $500 each for the less expensive iPad, the potential liability is $1,789,500. (*1)
District Technology Director Keith Rittenhouse at Shelby City Schools in Richland County, Ohio first realized the scope of the liability when the district began sending Chromebooks home with their high school students. “Previously, our devices never left the building, so there was no need to be concerned about damage and loss, Rittenhouse said. “But when we began to implement a One-to-One Chromebooks Initiative that would allow students to take the devices home, we knew we needed to insure them.”
Chromebook replacement costs range from $249 to $275 on average. With Shelby Senior High’s enrollment of 550 students, the potential liability for this one school falls between $136,950 and $151,250. The district is currently expanding its Chromebook program to other schools, and their liability increases with the purchase of each additional Chromebook. “We ask parents to purchase the device insurance,” said Rittenhouse. “Even if parents don’t buy it, the kids still take the Chromebooks home, but the family is then responsible for any damage or loss.”
The well-publicized $50 million purchase of iPads in LA Unified School District for 30,000 students at a replacement cost of $678 each creates an extraordinary multi-million dollar financial liability.(*2) As schools move closer to the goal of one device per student, their level of investment and potential liability increase exponentially. Both must be factored into a school’s total cost of ownership.
So what options do schools have to manage this liability? Schools’ property or general liability policies do not usually cover damage or theft of electronic devices. While student-owned devices may be covered under family homeowner insurance policies, deductibles for these policies may be too high to cover the replacement cost of a single device and do not cover accidental damage.
Schools and districts are now turning to device insurance policies to transfer their liability to a third party.
“The trigger point for most schools in addressing this financial liability comes when a school implements either a One to One initiative or a BYOD program reports Jesse Jamison, director of sales for insurance provider Worth Ave. Group.
An industry leader in helping schools and districts manage their financial investment in mobile devices, Worth Ave. Group reports that
“more than 80% of device insurance claims are for accidental damage, and schools don’t want to hold that liability.”
The Funding Challenge
Schools and districts have traditionally self-insured their mobile devices through regular budgeting, grants, or bond referendums. However, as districts have grown their inventory of devices, they have found that self-insurance is not a scalable solution. In fact, the CoSN 2014 IT Leadership Survey, 48% of respondents indicated that their current budgets are not adequate to meet all their district technology needs. Also, 68% of CTOs indicated they had managed their IT budgets by delaying replacements or maintenance upgrades and contracts.
While common, this practice can have unintended consequences such as equipment failure that results in disrupting the educational environment. When schools take on insurance policies for school-owned devices, they most frequently pass the cost along to their students’ families. Worth Ave. Group creates a parent portal through which families purchase coverage for their students. Families typically purchase a $0 deductible policy for one, two or three years.
Even in BYOD schools, insurance policies can still be made available to parents. When a school “adopts” a group insurance policy, individual families cannot be refused coverage. When they purchase the policy during the window it is offered by the school even if they have previously made claims for electronic devices.
Schools can also give families the option to supply their own device insurance. However, Shelby City Schools’ Rittenhouse explains that this option can lead to a surprising development.
“Some families who buy their own insurance are often surprised when the policy is canceled, or the premium increases after a claim is made,” he said.
“This is why it’s important to buy specialized device insurance for school devices.”
Controlling Your Insurance Risks
One way to reduce accidental damage is to instill a sense of ownership in students. Many schools ask their students and families to sign a pledge before the school issues a device to a student. That pledge requires the student to agree to a series of behaviors that emphasize the fact that he or she is ultimately responsible for the device.
To further protect their investment in mobile devices, schools often purchase or require families to purchase a hard case for tablets, iPads, and iPhones. These average $30 each, but can dramatically extend the life of a device. Neoprene laptop sleeves also provide protection and can be purchased for less than $10.
Worth Ave. Group often gives away iPad covers and screen protectors to existing clients saving schools and districts money as they don’t have to purchase these protection devices themselves.
Most device policies can be written with deductibles that range from $0 to $100 with unlimited claims for one to four-year service plans. To get a sense of cost, Worth Ave. Group’s director of sales, Jesse Jamison, provides a pricing example.
“For a new Google Chromebook, one year’s full coverage is less than $25 with a $0 deductible and unlimited claims. And if a school signs up for a multiple year policy, there is a small price break.”
If families decide to “opt out” of buying coverage, they become 100% responsible for repairing or replacing damaged devices, and it is up to the school to collect the debt.
The third option for insuring schools’ mobile devices is for the school to contract with a device leasing company. The insurance premium is rolled into the leasing price, and the schools own the devices.
Types of Available Coverage
There are national technology insurance companies that schools and districts can contract with directly, or they can choose a local insurance broker who has access to this type of insurance.
It is important for schools to understand the difference between traditional insurance, manufacturer’s warranties, and protection plan service agreements. Most traditional insurance policies do not cover lost items or devices or accidental damage. Manufacturers’ extended warranties usually only protect against mechanical breakdowns or device failures covered under the manufacturers’ limited warranty. Worth Ave. Group has the ability to combine insurance with an extended warranty.
Most school claims are for accidental damage. The number one culprit in damaged devices is the student backpack. In September 2013, Beth Pinsker reported (*3) that damaged electronic devices had cost families $2.8 billion over the previous five years.3 iPads and other tablets are the most susceptible to getting damaged in backpacks. Schools need to make certain that the policy they choose includes accidental damage protection.
Here are the most common types of policies:
- Full Coverage: Loss caused by Accidental Damage, Liquid submersion, Fire, Theft, Flood, Natural Disasters, Robbery, Burglary, Vandalism, and Power Surge caused by lightning.
- •Accidental Damage Only policy: Loss caused by Accidental Damage and Liquid Submersion
- Coverage without Accidental Damage: (Also called Theft only coverage) Loss caused by Fire, Flood, Theft, Burglary, Robbery, Vandalism, Natural Disasters, and Power Surge caused by Lightning.
- Warranty/ESP (Covers up to value of device): Loss caused by Manufacture Defect, and Mechanical Malfunction.
- Warranty/ESP Loss caused by: Manufacturer’s Defect, Mechanical Malfunction, Accidental Damage, and Liquid Submersion.
- Warranty/ESP W/ADH (Unlimited claims): Loss caused by Manufacturer’s Defect, Mechanical Malfunction, Accidental Damage, and Liquid Submersion.
Another frequent source of claims is theft, so it is essential that student devices are also covered for this. When a device is covered under a full coverage insurance policy (coverage: accidental damage, cracked screens, drops, liquid damage, theft, fire, flood, natural disasters and power surge due to lightning), there is no incident limit and there is full coverage limit for every single claim.
Some 3rd party warranty products that provide accidental damage coverage limit your benefit to one full replacement, so it is important to have all the facts when choosing a policy for your school or district. Benefits to Schools and Districts.
Although insurance offers more protection than manufacturer warranties and transfers the liability away from the district, the real benefit to schools is the support for limited technology staff. Not only do these policies relieve pressure on limited technology staff, they save on overhead costs. Buying policies that use one-stop vendors to handle repair and replacements are a major time-saver.
Once schools and districts begin researching their insurance options, they are happy to relieve their technology staff of some of the device management burden. Still, many districts opt to conduct a pilot program prior to going all-in.
Best Policy Features
Look for policies that have an easy claims process. Instructions for how to file a claim should be provided when you purchase a policy. Schools need a streamlined process that keeps student downtime to a minimum and quickly repairs or replaces a device. Also look for policies that have one third-party vendor to handle repairs and replacements of all types of devices rather than a vendor for each device type – one for iPads, one for Chromebooks, one for eReaders, etc. Using a single third-party repair vendor reduces the amount of time a school or district technology team needs to engage in the process.
Most electronic device policies require that the devices being insured have not been purchased more than 90 days previous to activating the policy. Worth Ave. Group does not require this. As long as a device is in working order, they will insure it.
There are two ways to receive the most cost- effective pricing: negotiate a good group discount based on volume of devices, or buy a multiple year policy. Finally, look for policies that include accidental damage and theft and allow for unlimited claims.
The financial investment that schools are making in mobile electronic devices from laptops to smartphones is in a steep climb as more and more schools invest in One-to-One Initiatives. Previously when devices remained at schools, districts could manage the financial costs of occasional damage and theft. The game changer is access to mobile devices where students take them home, resulting in the significant increase in devices in schools. As the numbers of devices a school or district owns increases, so does their financial liability. District sponsored group device insurance plans are a proven way to manage the liability by transferring it to a third party.
About Worth Ave. Group
From business owners and school administrators to students and the general public, Worth Ave. Group delivers affordable insurance coverage policies and warranty services that provide a sense of security should something unexpected happen to electronic devices.
About NewBay Media
This white paper was produced by Tech & Learning’s marketing services arm, NewBay Plus. Tech & Learning is the premier publication and leading resource for education technology professionals responsible for implementing and purchasing technology products in K-12 districts and schools. NewBay Plus provides content marketing and other services in NewBay Media’s five markets: Education, Music, AV/Pro Audio, Video and Broadcasting, and Consumer Electronics. For more information, contact Joe Braue at firstname.lastname@example.org.
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- Source: Boston Globe
- Source: Bloomberg Businessweek
- Source: Huffington Post