Pricey 'virtual' music collections sound off-key to U.S. insurers.

For millions of people, buying and listening to music has become an increasingly virtual activity. For music fans who don't particularly care about packaging or audiophile-quality recordings, it's far easier to click on a button and download a song than schlep down to the record store.

Apple Computer, just one vendor of online music, announced July 31 that its popular iTunes service just served up its 3 billionth download, just six months after hitting the 2 billion mark. At 99 cents to $1.29 a track, that's anywhere from $3 billion to $3.8 billion worth of music--all of it potentially living on devices the size of a cigarette pack, and highly prone to being lost, stolen or damaged somehow.

So what, then, if a virtual music collection is lost, stolen, or burns up in a house fire? Vinyl LPs and a CD collection could be covered as contents on a homeowners or renter's insurance policy, depending on the circumstance of the loss.

The same goes for expensive digital music players, such as Apple's iPods or Microsoft's Zunes. But what about the music on those players--which potentially could have cost thousands of dollars to download?

"I think the feeling out there is that the impact is such that it would likely fall under the deductible," on the homeowners policy, said Claire Wilkinson, of the Insurance Information Institute. Such losses "might well be covered under mi existing homeowners policy" that already covers a laptop or digital media player, Wilkinson said, but she noted there are issues surrounding the increased value tied up in the media stored on the device, such as proving that it was legally downloaded via receipts or other means.

So far, at least one insurer seems to grasp the implications of the stored value on those pricey little devices, but it's not in the United States. London-based Nationwide Building Society--not to be confused with Columbus, Ohio-based Nationwide Group--offers digital-media contents coverage, including mobile phone ring-tones, games, digital music and digital movies bundled with its standard home-and-contents policies. The policy covers fires, theft, flood and accidents, but not accidentally erasing the device's hard drive; that's a discrete policy exclusion.

With online purchases, there's a transaction record to prove the tracks were bought, and most online stores allow multiple downloads. Nationwide Builders said it expects policyholders to try that first before filing a claim.

A policyholder would be out of luck, though, if the same loss affecting the music player also affected the computer on which the files originally were stored--through theft, a fire or flood, for example.

Still, that's far ahead of anything apparently offered in the United States. Wilkinson said she wasn't aware of any such policies currently offered by U.S. companies, and several large homeowners writers said they hadn't heard of them either.

iPod By the Numbers

Apple Rules Digital Roost

68% The iPod's market share in 2006, an increase from 53% in 2005.

6% Creative Labs' market share, a distant second place to Apple.

27% Ownership of digital music players has more than tripled, from 8% in 2005.

28% The number of men owning digital-music players, up from 18% in the past year alone.

300% The number of female iPod users has tripled from 2005 to 2006.

45% Almost half of ali Americans downloaded music one way or another, up from 31% in 2005.

23% Americans who paid for a song download in 2006, up from 8% in 2005.

Source: Solutions Research Group