• Home insurance policies unclear as to what data is covered by their terms and conditions

  • Average pay-out for digital loss or damage is £1,000, although policies range from £500 to £10,000

  • Majority of policies do not cover for loss of data due to a computer virus

13 July 2018 – Many home insurance providers are failing to provide clear positioning on whether digital assets such as music, videos and photographs are covered in their policies, according to new research by Compare the Market. As more and more household assets are held online, the research suggests that the insurance industry needs to adapt and change to mirror our increasingly digital dependencies.

Compare the Market analysed the policy wording of 26 home insurers around the cover they provide for digital assets. Most of the policies (20 of 26 – or 77%) specify that they offer some protection for loss or damage to digital assets, however the definition of digital contents is often vague and inconsistent between policies. Most policies refer only to “electronic data” or “downloaded content”, whilst only five specify specific digital assets such as music or videos. Only two policies mention cover for digital photographs.

When specifying the type of digital assets which are covered, policies again vary. Of those policies which offer protection, many state that they will pay to replace legally downloaded audio/visual files which have been lost or damaged but will not pay to rewrite or remake them. Others specify that in order to be protected by the policy, data must belong to the policy holder or their family, and one policy stipulates that to receive compensation for data the policy holder must still have the receipt.

Policies also vary significantly in the level of cover they offer, with pay-outs ranging from £500 to £10,000. The most common pay-out is £1,000, cited by five providers. However, of the 20 providers which do specify they offer protection, six do not specify the specific pay-out amount for digital assets in their terms and conditions and customers may have to check these limits with their individual providers.

Level of payout Number of policies
£500 1
£1,000 5
£2,500 3
£3,000 2
£5,000 2
£10,000 1

Home insurers are, however, far clearer about exclusions to pay-outs for digital damage. Of those which offer protection for digital assets, 17 policies note that they do not provide cover for damage or loss to computers or data caused by a virus or malicious software. Only eight policies offer cover for damage or loss of contents stored on a mobile phone.

Six policies go even further and specify that they will not cover for any loss of data which results from a computer's failure to recognise, interpret or process correctly any date as its true calendar date or its ability to continue to function correctly beyond that date – for example, the so-called Millennium Bug in the year 2000 when many computer files were thought to corrupt.

However, households do not know how much insurance they would need to cover the value of their digital downloads if they were lost or damaged. In a recent survey of 2,000 people, over a third (37%) said they would have no idea how to calculate the value of their digital assets.

Chris King

Chris King

Head of Home Insurance

Compare the Market

“Many people have no idea how much their digital assets are worth but would be devastated if they lost expensive games, files or precious photographs. In an age of big data, when more and more of our “contents” are stored online, it seems the insurance industry has not yet adapted to keep up with the times. If there is a fire in the house and your CD collection is destroyed, you are reimbursed for the cumulative loss of these items. Why should it not be the same with your digital music library?”

“There will always be differences between policies, which is why it is always advisable to read your terms and conditions. However, with digital assets in particular, there needs to be more standardisation and clarity across the industry, just as consumers expect from all other insurance products. Levels of cover vary wildly between different policies so, if you have a lot of digital assets, it’s worth checking your policy and shopping around if you don’t feel your current one meets your needs.

“Besides looking for a comprehensive insurance policy there are other steps that everyone can take to keep their digital assets protected, including using different passwords, installing high quality antivirus software and backing up important data in the cloud.”