In this iPodding age, with hard drives aspiring to the condition of Universal Jukebox, here is an interesting practical query on the insurability of digital music downloads:
Let's just say (hypothetically speaking) that I bought all my songs from iTunes at 99¢ a pop. Let's just say. So what if both my laptop and my iPod are destroyed in a horrible, cataclysmic ... hurricane? Given that digital music is supposed to be actual property (that can actually be stolen, etc) does renter's insurance cover the $10,000 in lost songs?
Although it is posed in terms of renter's insurance, the question is an equally good one under a homeowners policy. The answer will likely depend, first, on whether the insurance policy applies at all to the particular piece of equipment on which all that music was being stored and, second, on whether the policy applies at all to loss of data. For purposes of this discussion, we'll assume that some more or less universally covered cause of loss -- say, an accidental fire -- is the culprit, so that we do not have to wrestle with all the "wind vs. water vs. whatever" issues that are causing such headaches in Louisiana and Mississippi courtrooms.
While every policy is different, computers or musical devices as tangible artifacts will likely be included under the "contents" coverage of a typical homeowners or renter's policy. Coverage for contents is, in fact, the most common reason to purchase renter's insurance, since the building owner's policy is virtually guaranteed not to provide any protection for tenants' personal property. If the particular policy either specifically states that it does cover electronic equipment, or if the policy covers losses to personal property generally and does not specifically exclude coverage for some or all electronic equipment, we are over the first hurdle.
Unfortunately, while electronic equipment itself is likely covered, the bits and bytes stores in and on that equipment very likely is not. Most policies are likely to be written in terms of covering "direct physical loss" and data, even though stored physically, is often not considered to be "physical" in itself. Additionally, many policies will contain specific exclusions barring coverage for the value of lost data or for the cost of recovering or recreating it. This quote from a 2005 Pittsburgh Business Journal article on overlooked homeowners coverages sums things up:
Computers and data: Do not assume that your home computer is automatically included in your policy -- especially if you use your home computer for work or in a home-based business. Also, your policy may not cover the cost of lost, damaged or stolen computer programs, or the expense of recovering data lost or trapped on damaged hard drives and other media. In particular, homeowners with home-based businesses should investigate riders or other supplemental coverage to adequately protect equipment, software and data.
That distinction -- between the physical hardware and the intangible information it contains -- is a fairly common one in insurance. When data itself is injured or lost, with or without some physical damage to the equipment on which it resides, it generally is not going to be covered unless the applicable policy refers to it explicitly. For more, this 2001 IRMI article on the question "Is Computer Data 'Tangible Property' or Subject to 'Physical Loss or Damage'?" gives an idea of how many different directions the courts have gone in debating the issue.
The upshot for worried iPod users: (1) Read your policy carefully, to get an idea of how likely you are to lose your investment; and (2) consider physical remedies such as off-site backups of music or data that you would not want to lose or (3) use a download provider (such as eMusic) that is relatively free in allowing re-downloading of previously purchased music.
An Afterthought: Even if you have coverage on your policy that applies to the loss of downloaded music, you should only expect coverage for legally downloaded tracks and the insurer will be right to expect you to provide proof of what was lost and how it was obtained in the first place. It has long been the rule that one who has acquired property illegally -- for instance, a thief -- acquires no title to and possesses no "insurable interest" in that property, rendering it effectively uninsurable.
An Additional Afterthought: Remember, please, that insurance serves the purpose of compensating the insured for a loss actually suffered. That is, it works to put the insured back in essentially the place the insured occupied before the loss occurred. So, if there is no cost entailed in replacing that lost music, there is nothing for the insurer to pay: other than the time it will take to re-download, you have not lost anything and a payout for the original price of the downloads is simply a windfall. Insurance would enter into it -- assuming that the applicable policy actually covers data loss of this sort -- only if there is some expense entailed in putting the insured right back where they started from.
[Link to the original question via Idolator, where the ensuing comments reflect less than well on music lovers' opinions of their insurers. Photo by lyn belisle, via stock.xchng.]
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