I keep mine in a sleep cover. I'm not sure why - I take it with me in a small backpack most of the time, and all the electronic devices in there have some form of protection.
I dropped my previous ereader (while reading & walking) twice, and the only noticeable damage was nicks in the corners - not sure if the cover had any influence on this, but I was happy with the result.
Occasionally, I'll remove the cover while reading - typically when reading in a calm place, when the added weight makes it uncomfortable. I like to read while in my bath, and less weight in hand makes me more confident I won' t drop the ereader (it's supposed to be waterproof, but better safe than sorry).
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