What to Know About Insurance for Student Devices
Unknown costs are the bane of a school administrator’s existence. Education budgets are always being pushed to provide more than what the bottom line can provide. So when districts loan computer equipment to students for home use, the fear of uncontrollable costs from damage, loss, and theft is a major concern. Sometimes it’s enough to derail the loaner program altogether.
While no one can tell you definitively what the cost will be to repair damaged and replace lost and stolen devices, that is precisely the challenge that insurance companies are expert in determining. Behind the scenes, insurance companies are researching potential risks, tracking statistics, and employing mathematicians — more specifically actuaries who are crunching the numbers on this very issue among many.
Does this mean districts should purchase commercial insurance to protect their investments in devices for students? There are many considerations districts should take into account as they make this decision.
1 | PLAN COVERAGE
What does the insurance plan cover? Generally, plans may cover claims against accidental damage, mechanical failure, natural disaster (fire, flood, etc.), power surges, vandalism, theft, and loss. But providers package these coverages differently, and schools need to look carefully at what is and is not covered.
2 | MANUFACTURER WARRANTY
What does my manufacturer’s warranty cover? And for how long? New devices typically carry a one-year warranty that provides protection against manufacturer’s defects. Typically that means device component failures that are reasonably unexpected. Among those types of protections offered by insurers, a warranty generally only covers “mechanical failure”. Increasingly, some manufacturers are mixing warranty protection with insurance-like protections. Typically limited on the number of claims per device, some manufacturer warranties now include no-fault repair/replacement.
Taken together, insurance and warranties may have overlapping protection. Districts should weigh the costs and coverages provided by warranty and insurance. Since warranty is typically included for a year at initial purchase of devices, districts choosing to purchase insurance may be able to purchase less comprehensive coverage in that year. If you have an extended manufacturer’s warranty, that may be true in the future years as well.
3 | DEVICE REPAIR AND REPLACEMENT
When a device needs to be repaired, do repairs completed by your insurer affect your manufacturer’s warranty coverage? For example, if your insurer’s repair facility replaces parts with grey market or third-party parts, some manufacturer warranties may balk at covering associated failed components because the off-brand replacement part potentially caused the failure.
Additionally, what is the process? How long will it take? For repairs, districts should consider the logistics of managing the repair (filing claims, sending to/from the repair center) as this has a time cost, and it may impact how the district manages temporary loaners. For example:
If a student’s device is accidentally damaged, and it takes 2 weeks for the insurance provider’s repair facility to fix the device, you will need to issue another device to the student for those two weeks. The longer the turnaround time, the larger the pool of devices that you will need to have to ensure device access to your students. Alternatively, many districts simply reassign the new loaner to the student, and the device needing repairs is repaired and then awaits reassignment to another student as needed.
When a device needs to be replaced, how long will it take for the replacement to arrive, and perhaps more importantly, will the replacement be an exact match to the lost device? If you had an extended warranty on the lost device, will you be able to transfer this warranty protection to the replacement device? Additionally, if the device is not the same exact model, districts will need to be more conscious of potential inconsistencies in performance and compatibility for that device. Peripherals like power adapters may not match the new device.
4 | PROGRAM SIZE
How many devices are in the program? The relative risk to your district’s investment is very much driven by the size of your device pool. Districts should expect that there will be damage and loss. The smaller your device pool, the more impactful any single incident becomes. At scale, it is not uncommon to see 1-3% of devices damaged or lost in any given year. But if your device pool is relatively small, like 100 devices, then each device represents a percentage point, and if your device pool is only 10 devices, each device represents 10% of your pool.
Larger deployments may find that insurance is less valuable than smaller deployments. Very large district device programs are strong candidates for self-insuring if they are large enough that risk is spread over a large pool of users, and the district is able to better manage purchasing additional devices at discount, can provide in-house repairs, and overall save money.
5 | LEASE AGREEMENTS
Do you finance your devices? If so, many lease agreements include requirements to purchase insurance to cover, at the minimum, catastrophic loss coverage. This type of coverage is typically best done by including it in the coverage you already have for your school facilities. Your business office can work with your insurers to add appropriate riders to the existing catastrophic loss coverage for the school building. In many instances, the devices do not significantly affect the premiums given the actual value of the devices compared to the value of the building. Further, your business office should make it clear that the devices are not housed and static in the building, but spend most nights outside the building throughout the school year.
6 | SAFE STORAGE
Districts should work with insurers, local law enforcement, and their facility teams to consider how devices might be stored over the summer break. As devices are highly mobile, they can become a target for break-ins and theft when stored in large quantities in a building that is mostly vacant over a long vacation.
The Actual Cost
Fundamentally, districts should recognize that in the long run, there are two main truths to insurance. First, the actuaries are good at what they do. That means that they can project the cost of providing your district protection against incidents like accidental damage, vandalism, theft, and loss accurately — and especially when placed within the context of the much larger pool of all of the schools that they are insuring. Second, there is no free lunch.
HOW DOES THIS HELP?
The policy premium your district pays for insurance should be larger than the actual cost to provide you the repairs and replacements promised by the insurance plan. If your costs and every other insurers costs were larger than the premium, the insurance company wouldn’t be in business anymore. The insurance company is fundamentally a casino. They don’t control the odds, but they do control the premiums. In any given year, if the cost of providing you service significantly exceeds their expectations, chances are your premium will be higher the next year as you’ve demonstrated that you are a higher risk client.
In the end, you can choose to pay for repairs and replacements in advance through insurance premiums. This provides your district peace of mind and predictability. Year to year, your premium may change, but in this budget year, your costs are contained and predictable. On the other hand, you can choose to be on the pay-as-you-go plan, and forego insurance and simply pay for the repairs and replacements as they occur. With either approach, districts should carefully track incidents and associated costs.
There are many factors that can affect the likelihood and frequency of accidental damage, loss, and theft. Knowing if your policies and practices are working isn’t simple to understand, but you can use your insurance premium or the quoted amount (if you are on the pay-as-you-go plan) as a baseline.
If your costs exceed the premium or quote, then you should ask yourself why your costs are in excess of what the actuaries predicted them to be. Look at your policies and procedures, and look at your incident data for trends that can help you make adjustments to how you manage your program.
If your costs are lower than your premium or quote, you can rest assured that it is likely that you’re on a good path, and that your policies and procedures are striking a good balance between risk mitigation measures and developing trust in your student community. If you purchased insurance, you may want to reconsider maintaining coverage if your actual costs for repair and replacement are consistently below your premiums year over year.