Sounds correct. I don't speak from experience with an iMac, but that was the case with my MBP, which also has a user non-servicable HDD. You have to pay them a service fee for the upgrade. If I remember correctly, if I provided the HDD, if it needed replaced, I would have to pay the service fee again, whereas if they provided the HDD, the service would be free if it needed replaced while under AppleCare.