INSURING YOUR COMPUTER

If you have a laptop, you can buy a floater policy which covers the unit anywhere you bring it. This policy insures against “all risks of direct physical loss or damage from any external cause.”  Don’t get carried away by the term “all risks.” The policy includes a long list of exceptions such as wear and tear, corrosion, mechanical breakdown, strike, riots, civil commotion, and so on, and so on.

If you have a desktop, you can include it in the policy covering your household or office contents. Or, you can get an All Risks policy as on the laptop.

If you have a mainframe, then any of the policies especially designed for mainframes is best. Some companies call it Electronic Equipment Insurance. Others go by the name Computer All Risks Policy. Whatever the name, the policies are basically the same.

First, the policy covers hardware which is defined as “those parts of the electronic data or word processing installation including the central processing unit, data storage devices, control console, disc drives, magnetic tape transports, power pack, and all input or output equipment operating under the direct control of or connected to the central processing unit, and associated air conditioning equipment.”

Second, the policy covers software which means “tapes, disks, magnetic cards, or other material used to carry data in a form directly assimilable by” the hardware. Invoices, bills or other documents from which the input data is produced, and printouts are not considered software.

Third, at your option, the policy can pay you the cost of labor employed or fees or other charges, calculated on the basis of standard rates, paid by you for the purpose of reinstating data following a covered loss. This includes cost of reinstating data into software, lost because of damage to the software itself, failure of electricity, or damage to the computer and attendant equipment, but also the considerable cost involved in collecting the data all over again from various sources.

Finally, you can have the policy extended to include “increased cost of working.” If the mainframe is damaged by a peril insured under the policy, you may have to hire computer time at an outside installation. The additional cost will be paid under a rather complicated formula. You will also be reimbursed for any “reasonable charges payable by you to professional accountants or auditors for producing any particulars or details or any proofs, information or evidence” required by the insurance company to prove your claim.

If you are in the business of hiring out your mainframe, you also need Loss of Gross Profit or Loss of Revenue Cover. As the name implies, the policy will pay you for loss of gross profit or revenue over the period your mainframe is being repaired or replaced following damage or loss covered under the policy.

All policies warrant that the hardware be covered by a maintenance agreement at all times when the policy is in force. This means that you cannot buy this policy unless a maintenance agreement is in force at the start of the policy, and if the agreement expires during the term of the policy, the coverage automatically is cancelled.

Buying a computer policy is not a do-it-yourself job, given the need to tailor the policy to the particular installation. It is best to get professional help. Call an insurance broker.

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INSURING YOUR IMPORTATIONS

Whenever possible, import of C&F (Cost and Freight) basis, so that you buy the marine insurance policy here. If you let your foreign supplier arrange the coverage, which is what happens when you import on CIF (Cost, Insurance and Freight) basis, the insurance may cost you less. But the advantages of a local policy far outweigh the money you save. First, the policy cost of your importation goes down, although not by very much. But, more important, is that, if you have a claim on the policy, it will be far easier to deal with an insurance company just down the street that across the ocean.

If you have to import on CIF basis, you must ask your supplier for a specimen of the policy and let your insurance broker examine it. Insurance companies abroad have been known to cover cargo only up to dockside in Manila, sometimes because they do not know what the port conditions are like, sometimes because they do. Your cargo should always be covered uninterruptedly all the way to your warehouse.

When you open the letter of credit on your C&F importation, the bank will require you to insure at invoice value plus a mark-up. Whatever the bank says, the mark-up should be large enough to cover duties and taxes, arrastre and inland freight.

The bank usually requires an All Risks policy, unless your cargo, either because of its very nature, or the way it is packed or shipped, can or should be covered only under a form that is less comprehensive. For example, bulk shipments of cement cannot or should not be covered against All Risks.

If you will be importing infrequently and irregularly, the insurance company will insure each shipment under a separate policy which you will file with the bank. In effect, you will be buying insurance on a retail basis.

If you will be importing frequently and regularly, and at a sizeable annual volume, you can qualify for an Open Policy. The most significant feature of this policy is that it automatically covers all shipments within the limits set forth in it. You file the Open Policy with the bank, and the bank knows that all your orders are insured. If the volume warrants it, premium billings can be done monthly to cut down on your administrative work. Premium rates are usually lower in an Open Policy because you are buying on a wholesale basis over a period of time.

Anyone who doubts that a free market works should take time at understanding how marine cargo insurance business is done. Marine cargo insurance, the first invented by men of commerce, it a commodity that is traded all over the world in a truly free market. It was this way at the beginning. It is so today, almost three hundred years later.

Our Insurance Commission does not regulate premiums. Companies here charge whatever premiums the market will bear, tempered always by the need to make a profit. Almost all non-life companies sell marine cargo insurance.

But, because of this free market, when you buy marine cargo insurance, you entire a veritable jungle. Also, you will be buying one of the most complex products ever thought of.  Don’t do it yourself. Get professional help. Call your insurance broker.

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INSURE YOUR DREAM HOUSE DURING CONSTRUCTION

09 August 1988

I am finally going to build my dream house soon. What insurance should I have on it during construction?

The best insurance you can buy is the Contractors’ All Risks (CAR) policy. This policy was originally designed for contractors to cover their exposure in large construction projects, vertical or horizontal.

When this policy was introduced in the Philippines almost thirty years ago, the general contractor was always the insured. Later, it was realized that the owner had an insurable interest on the project from the very start as the contract required him to make a down payment and subsequent partial payments as construction progressed. It was necessary for the owner, not only to be insured, but to have control of the policy throughout the project.

It was also realized the policy could be used to protect the ordinary home builder.

Today, CAR is used to cover all sizes of projects and is issued in the joint names of the owner, the general contractor and his sub-contractors.

Like all other All Risks policy, CAR does not really insure against ALL risks. But it is more comprehensive than any bunch of policies you can put together. Some of the standard exceptions are: war, rebellion, riot, strike, willful negligence.

You should tell your contractor early enough that you will take care of the insurance during construction so that he will not include the premium in the project cost. If will be cheaper for you this way.

The policy will be issued at the estimated completed value of your house, plus a small amount for debris removal. Later, if it becomes clear you will have an over-run, in terms of time and cost, you should have the policy adjusted accordingly.

The premium will be based on the mean value of the project over the period of construction. At any time, the policy covers the total value of that part of the house that already has been erected and the materials on the site.

The policy starts from the instant materials arrive on the site and ends when the project is turned over to you or when you occupy the house, whichever comes first.

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