Insurer will pay for damaged iPhones

Two years after the Apple iPhone’s debut, a longtime insurer of electronic gear is finally offering insurance for it.

Safeware, which began studying the possibility of insuring the hot device when it debuted in 2007, began offering coverage commercially last week, according to Marketing Manager Mike Cole. The policy covers theft, accidental damage, liquid spills, drops, power surges, fires and floods, among other things. Rates start at $62 per year for an 8GB iPhone 3G.

The iPhone’s standard warranty provides one year of hardware repair coverage and 90 days of technical support. Users can buy an AppleCare plan to extend that coverage. But neither covers theft or accidental damage.

The Ohio company has insured PCs since 1982 and already offers coverage for many other smartphones, including the BlackBerry Storm and the Android-based T-Mobile G-1. But as in so many other things, when it came to insurance, the iPhone is special.

Safeware typically uses third-party repair companies to fix devices that policyholders send in damaged, Cole said. After the original iPhone debuted, with Apple’s tight control of the device, Safeware studied the market carefully and waited. The advent of significantly new hardware with the iPhone 3G in July 2008 changed the picture again, and it took until this year for the company to organize its iPhone plan, Cole said. In the meantime, some other companies, such as SquareTrade, introduced coverage plans of their own.

Safeware's delay may have happened because its iPhone coverage has a somewhat unconventional business plan.

Policyholders with stolen or significantly damaged iPhones will get the full, non-subsidized price of the hardware, minus a $100 deductible. That helps iPhone owners whose phones are destroyed in the middle of their AT&T contracts, who would otherwise get no discount on a new device. For example, for a current 16GB iPhone 3GS, they’ll get $300. Proof of ownership, and a police report in the case of theft, are required.

Safeware will support this business both by collecting annual premiums ($82 in the case of the 16GB device) and by salvaging parts from the damaged phones and selling them to third-party repair companies. This doesn’t run afoul of Apple, Cole said.

The iPhone policies are available only to U.S. residents. Customers can buy global coverage for an extra cost. So far, the response has been positive, Cole said.

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