IT insurance and warranties

With IT at the heart of your business, it is vital to keep everything running smoothly. In addition to taking sensible security precautions, warranties and IT insurance can help you manage risk so that if any problems do arise, your equipment and data is covered.

Sources of IT insurance

There are four main places your business is likely to get IT insurance cover and warranties:

• The equipment manufacturer. All new hardware should include a manufacturer’s warranty, guaranteeing it free from defects for a reasonable period – usually a year.

  If the price is reasonable it can be worth extending this basic cover for the expected lifespan of the equipment. However, as you’ll generally have to send equipment off for repair, get extra protection for key items. You want a broken server fixed within hours, not days!

• An IT support company or supplier. If you outsource support or rely on a single IT supplier, that company may offer cover as part of the service. This is a good option where a quick response is important – for instance, when you want someone on site fast to fix a broken server.
• An insurance firm. You can buy cover for theft, damage and loss. Insurers will typically pay out either the full cost of replacement equipment, or its estimated value at the time of the loss. It often makes sense to take out IT insurance as part of a policy covering the whole business.
• Your existing business insurance may already include some IT insurance – covering, for instance, equipment failure, damage and theft. If not, insurance companies are often happy to extend their standard cover to fit your requirements.

Each source of cover tends to be good for a different thing. For instance, manufacturer’s warranties provide basic protection against failure but don’t cover theft, whereas IT business insurance covers theft too. For many businesses, cover from a mixture of sources is the best option.

Assess the risks for your IT business insurance

The purpose of IT insurance is to reduce your exposure to additional, unexpected costs. For instance, insurance might cover the cost of purchasing a replacement computer, or pay out to cover the loss of business resulting from a server failure.

In many cases, the consequential loss of IT failure can be higher than the cost of the equipment itself, so it’s important you get a level of cover that provides for this.

For instance, a replacement server might cost £1,000, but your company could lose £10,000 worth of business due to being unable to process customer orders. It pays to consider what those losses could be as part of your disaster recovery planning then make sure you have adequate insurance cover which reflects the risks.

Many businesses take the view that it’s worth having equipment covered against failure for the whole of its expected lifetime. So if you plan to depreciate the cost of a new laptop over three years, you’d make sure it was covered for three years too.

The cost of this type of cover can vary vastly. Purchased from a High Street retailer as an ‘extended warranty’, it’s often terrible value. You can almost always obtain the same level of protection much more cheaply from an insurance firm or your IT support company.

More on this topic:

• IT support
• Continuity planning and back up options