Is your company’s data insured?

Does your business use computers? Do you store customer or client data? Maybe your business is entirely online, and you couldn’t function without your tech? If this is the case, you may need electronic data processing (EDP) insurance.

What is EDP? What does it cover? Most importantly, do you really need it? We’re here with some answers.

What is electronic data processing insurance?

You might also see EDP referred to as computer coverage or data processing coverage. You can buy it as a separate policy or as a supplement to your commercial property policy. It’s meant to cover computers and other electronic data processing equipment, including hardware, software, and communications equipment.

EDP may cover:

  • Mainframe computers, laptops, and workstations
  • Copiers and scanners
  • Telephone systems
  • Air conditioning equipment that’s used for computers
  • Software and data
  • Media

When buying a policy, you’ll need to specify the hardware/software and types of equipment that should be included. It will even cover leased equipment, though you’ll have to ensure it qualifies under your policy.

Software includes computer programs, apps, proprietary programs, and data associated with that software. Media refers not to actual content but to the physical devices that store it. This might include servers, discs, drums, and tapes. Media is sometimes included with “software” coverage on some policies.

Covered perils

Now that you know the basics of EPD policies, you’ll want to understand what circumstances are covered. Most policies cover “all-risks,” so unless something is expressly excluded, it’s probably covered. Coverage also includes damage due to floods and earthquakes, which is excluded from many commercial property policies.

Covered circumstances:

  • Fire damage
  • Wind damage
  • Electrical disturbances
  • Temperature and humidity changes
  • Mechanical failures
  • Hacking or computer viruses

Disruption in business due to utility service problems is usually not covered. You can usually buy extra coverage for these circumstances, however.

EDP coverage can be used to protect your business in case of a cyber event, hacking, or a computer virus. However, you may need cyber insurance, especially if your business stores a lot of sensitive customer data.

How much coverage do you need?

EDP coverage can be calculated in a few different ways.

  1. Actual cash value of equipment
  2. Replacement cost
  3. Functional replacement cost (the cost to replace an item with a “functional” equivalent)

Functional replacement cost might be a good idea if your industry experiences frequent technology changes. If an older piece of equipment cannot be repaired because it’s out-of-date or no longer sold, it can be replaced with a similar model.

In the case of damaged or destroyed software, policies can be written so that the costs to reinstall or reproduce it are covered.

What happens if your business is interrupted?

Many businesses these days rely entirely on data to operate. If you sustain damage to equipment or systems, you might not be able to function at all. Business interruption insurance may help you in some ways. However, you can include business income and extra expense coverage in your EDP policy. If it’s not included automatically, you can request it that it be added.

Additional coverage

EDP coverage may include additional equipment and software, either automatically or at your request. There may be limits to the coverage, however.

  • New EDP equipment
  • EDP equipment acquired with or for new locations
  • Transporting EDP equipment
  • Off-site EDP equipment

NOTE: EDP policies are designed to cover equipment and software that is at a specified physical location. However, you can extend coverage to include equipment that is used off-site such as laptops or tablet devices. If your employees work remotely or you are currently operating under a “work-from-home” model due to COVID-19 restrictions, this coverage may be necessary.

Cover your data

Your company’s equipment and data is essential to do business. You must protect it in case the worst happens. Electronic data protection is your line of defense.

Avante Insurance can help you secure EDP coverage. We can also take care of a wide range of commercial insurance needs, including: 

  • Commercial property
  • General liability
  • Commercial auto
  • Workers’ compensation
  • Professional liability
  • Employment practices
  • Commercial umbrella

Contact us to talk about your commercial insurance needs and request a quote. We will ensure you have the right coverage to protect the business you’ve worked so hard to grow.

This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.