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Telecom Insurance: A Necessary Evil? (Part 2)

As I wrote previously, insurance in the IT/telecom world is just as important as it is for our personal lives. In that piece, I discussed telecom insurance in general terms. Now, as promised, I will look at a few specific examples of popular telecom insurance policies.

Inside Wiring Maintenance
A common feature, which usually costs about $4-8/line, is inside wiring maintenance insurance. This is often called different names by insurance companies (Guardian, Linebacker, Protection Plus, Sentry, etc.), but they all provide the same feature: insurance for problems with your inside wiring.

The local carrier is responsible for bringing the line to the MPOE (Minimum Point of Entry), which is usually your building's phone closet. The wiring from the MPOE to your PBX or phone/fax machine is called the "inside wire." If you have a problem with this inside wire, inside wiring maintenance insurance will ensure that the local carrier fixes it for no charge.

Inside Wiring Insurance Value
If you have a PBX, inside wiring maintenance insurance is not needed. You either have resources onsite who can identify/trace out lines, or you will call your PBX maintenance vendor, which will dispatch a tech to find and correct the problem.

For sites without a PBX, is inside wiring maintenance insurance a good value? Look at it this way: Instead of paying $5/line on inside wiring maintenance for 4 lines at your remote office, you self-insure. Assume the local carrier will charge you $125/hour to fix an inside wiring problem. Over the past 12 months, you spent $240 ($5/line * 4 lines * 12 months). In order for inside wiring insurance to be a justified expenditure, you would have to call the local carrier about every 6 months.

SANITY CHECK #1 - We often find that a client will have some lines with inside wiring maintenance insurance. We ask, why only on these 3 (out of 21 lines)? Do they even know that 3 lines have this special feature? Invariably, there is no reason why these 3 lines have this feature, outside of the fact, that they have always had it.

SANITY CHECK #2 - How often in the past 12 months has the client called for repairs specifically for inside wiring problems? How often was repair called in the past 24 months? More likely than not, there have been no calls for problems. Often it has been years since there was a need for the telephone company to come out to fix the line. And even in these situations, the repair was on the "telephone side" of the MPOE.

Note: We have run across some rare situations where inside wiring maintenance insurance may make more economic sense:

  • Example #1 - A building that is remote (i.e. transmitter station) where your vendors may charge extra for travel time.
  • Example #2 - A building that is infested by rats (i.e. chew through wiring).

Cell Phone Insurance
Perhaps the most common area for insurance is with your cell phones. Do you insure your phones against accidental loss or damage? Is cell phone insurance a good value?

The answer can be found by running the numbers. What is the cost of insurance ($10/month/phone)? What is the deductible ($50 or $100)? How often have you replaced phones? Is insurance justified?

Even if cell phone insurance is justified, it still may not be "worth it." For example, your vendor may make the claims filing process so cumbersome that it simply becomes too time consuming to administer.

Should you have insurance on old cell phones? If a cell phone is more than 1 year old, does it make sense to insure a phone that you are likely to replace in a year or two? Just as financial experts say you should consider dropping comprehensive and collision insurance on cars that are 5-7 years old, should you also consider dropping cell phone insurance after a certain amount of time?

Of course, there are situations where cell phone insurance may make sense:

  1. On new and expensive phones
  2. If your users are in job functions where phones are more likely to be damaged (i.e. facility personnel who may drop and lose phones)
  3. If the individual has a history of being "accident prone"

Run the numbers. If you are insuring 100 phones and are paying an average of $9/month ($108/year), this works out to be $10,800/year. If a replacement phone costs $500, then you would need to replace 22 phones in a year to break even.

Bypass Lines
Many companies will have analog (POTS) bypass lines, in the case that their PBX loses power. With an analog line, they can be connected to a specific phone if the PBX is dead. This allows them the ability to make and receive calls, which may be vital. After all, the loss of the PBX may be a symptom of a larger problem (i.e. fire, other catastrophe). The ability to place a help call can be critical in such scenarios.

The value and criticality of bypass lines have greatly diminished over time due to advanced technology. The ubiquity of cell phones provides another means to reach outside of the office. Internet connectivity allows you to communicate via email as well via VoIP technology.

SANITY CHECK - Can you identify your bypass phones? Do you even know whether you have bypass phones? If you answered no to these questions, then you should reconsider these devices.

Conclusion
Part of your regular responsibilities is to analyze and understand risk management. In addition to finding billing errors and inventory issues, a comprehensive telecom audit should also consider risk management factors.

"SCTC Perspectives" is written by members of the Society of Communications Technology Consultants (SCTC), an international organization of independent information and communication technology professionals serving clients in all business sectors and government worldwide.

  • On new and expensive phones
  • If your users are in job functions where phones are more likely to be damaged (i.e. facility personnel who may drop and lose phones)
  • If the individual has a history of being "accident prone" Run the numbers. If you are insuring 100 phones and are paying an average of $9/month ($108/year), this works out to be $10,800/year. If a replacement phone costs $500, then you would need to replace 22 phones in a year to break even.

    Bypass Lines
    Many companies will have analog (POTS) bypass lines, in the case that their PBX loses power. With an analog line, they can be connected to a specific phone if the PBX is dead. This allows them the ability to make and receive calls, which may be vital. After all, the loss of the PBX may be a symptom of a larger problem (i.e. fire, other catastrophe). The ability to place a help call can be critical in such scenarios.

    The value and criticality of bypass lines have greatly diminished over time due to advanced technology. The ubiquity of cell phones provides another means to reach outside of the office. Internet connectivity allows you to communicate via email as well via VoIP technology.

    SANITY CHECK - Can you identify your bypass phones? Do you even know whether you have bypass phones? If you answered no to these questions, then you should reconsider these devices.

    Conclusion
    Part of your regular responsibilities is to analyze and understand risk management. In addition to finding billing errors and inventory issues, a comprehensive telecom audit should also consider risk management factors.

    "SCTC Perspectives" is written by members of the Society of Communications Technology Consultants (SCTC), an international organization of independent information and communication technology professionals serving clients in all business sectors and government worldwide.