Electronic data processing (EDP) insurance covers electronic data processing equipment (i.e., computers, servers and disks) from accidental damage.  Y2K never happened, but the thought of electronics glitching is still pretty scary for the small businesses that use them every day. 

Whether you’re a startup that’s invested extensive capital in specialized equipment or a burgeoning marketing agency that provides its staff with new laptops, you want to insure your tech in the case of disaster.

Do you need EDP insurance?

In a nutshell, yes. If your small business deals with electronics at all — especially ones that are used or operated off-premises — you need EDP insurance.

In fact, you need EDP insurance if you work with any electronic media, data, or hardware during your daily business operations.1

What does EDP insurance cover?

EDP insurance is an add-on, or rider, to a basic commercial property insurance policy. An add-on fills in crucial gaps in coverage that might remove an exclusion or add necessary coverage unique to your industry. Sometimes it can be written by itself, separate from any other policy.

The EDP policy covers electronic equipment belonging to three main categories:

  • Data – This includes software, computer programs, and other forms of data that are valuable to a company, including proprietary software and operating systems.
  • Media – This category features any devices that store data, like drums, discs, and tapes.
  • Hardware – Hardware includes any electronic equipment, including laptops, workstations, computers. Depending on the policy, it can also include printers, copiers, scanners, telecommunications systems, and cooling systems used solely for hardware.

Your EDP insurance provider will cover the replacement cost or the cost to repair these items, should they be damaged as a result of the following occurrences:

  • Temperature and humidity changes
  • Computer viruses
  • Hacking by a third party
  • Hacking by an employee
  • Lost profits due to electronic malfunction or damage
  • Extra expenses incurred by the total or partial shutdown of operations due to electronic malfunction

When determining the value of damaged goods, your EDP provider will come up with a figure based on factors like:

  • The cost to replace that item
  • The functional replacement costs of that item (to purchase a similar item if you can’t acquire an exact replacement)
  • The item’s cash value

What does EDP insurance not cover?

While EDP insurance typically features few exclusions, you still want to be aware of how your policy is underwritten to avoid getting surprised by uninsured damages.

Two of the most common perils that are not covered by EDP insurance are financial losses or damages caused by a utility service interruption.2

For example, you may suffer a power failure that shuts down your hardware or stalls workflow. If your business operations rely heavily on your connection to power, double-check your policy to ensure that utility service interruption is covered.

Additionally, not all EDP policies will cover damages from earthquakes or floods.

How to find the right EDP policy for your business

Not all EDP policies are the same. When you’re searching for the right insurance policy for your business, make sure you are very familiar with the details of your coverage.

Before paying the premium on EDP insurance, be sure to nail down the following aspects of your policy:

  • Whether it covers equipment handled or transported offsite. If not, you may need to add a floater policy to your existing EDP insurance plan. (A floater policy covers personal property that insurance normally doesn’t cover.3)
  • Whether this policy covers damage caused by hacking or viruses—and to what types of electronics (hardware, data, or software).
  • Exactly what types of electronic goods are covered.
  • What perils are excluded from this policy and whether any add-ons exist to compensate for them.
  • Whether this EDP policy covers extra expenses accrued or income lost due to damaged or malfunctioning equipment.
  • Precisely how your provider calculates the value of the damaged EDP property.

Additional coverage to consider

Even after an intensive and scrupulous search for the best EDP policy possible, you might still be left wanting extra insurance coverage. In that case, consider paying for an add-on to boost your peace of mind.

These may include:

  • Catastrophe perils such as earthquake, flood, or named windstorm
  • EDP equipment at newly acquired premises
  • EDP equipment in transit
  • Newly acquired EDP equipment
  • EDP equipment offsite
  • Utility interruption

When it comes to EDP coverage, it’s worth it to make sure your wires aren’t crossed.

Protect all your nuts, bolts, and power cords

Along with standard commercial property insurance (and, of course, an EDP add-on), you may also want to consider purchasing other essential insurance offerings for small businesses:

  • General liability insurance – General liability insurance is a must-have for any small business. It helps protect you from the financial consequences of any third-party claims of property damage, bodily injury, or advertising injury.
  • Professional liability insurance – Professional liability insurance will protect you from the financial consequences of a negligence claim, where a client alleges that your advice resulted in their financial loss.
  • Business equipment protection (BEP) – Also called inland marine insurance, business equipment protection extends your basic commercial property insurance to goods and equipment being transported or handled off-premises. Consider it if you ever need to move tools from site to site, or are frequently receiving shipments over land.

Thimble arranges insurance with small businesses in mind. We care about your success and want to make sure you have the confidence you need to do what you do best. That’s why Thimble offers flexible insurance by the job, month, or year.

To buy general liability, professional liability, or BEP insurance immediately, click “Get a quote” or download the Thimble mobile app. Input a few details, get your quote, and when you purchase, you’ll have your Certificate of Insurance right away.

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Get surge protection with EDP insurance

Everyone has bad days. While some of those days only involve spilling coffee, others involve spilling coffee on your computer keyboard.

On those types of bad days, you’ll be happy you have EDP insurance.

Whether you have a cartoonishly clumsy staff, operate in a theft-prone area, or simply want to play it safe, be sure all your electronics are protected with this must-have policy.

Otherwise, you’ll just have to pray that Murphy’s Law takes a day (or 365 days) off.

Sources:

  1. Law.com. EDP Coverage. 
  2. The Balance SMB. Insurance Coverage for Electronic Data Processing. 
  3. Investopedia. Floater Insurance.