Is your Media, Data, or Hardware Excluded?

In today’s business environment, almost all organizations have investments in Computer Equipment, Electronic Data, and Media.   Whether it is desktops, hard drives storing data, client records, proprietary or prepackaged software, it’s important that your insurance policies keep up with your technology needs.   Unfortunately, many property policies exclude data, media, and losses related to a computer virus or someone hacking your computer systems.

EDP insurance, or Electronic Data Processing, is designed to help fill these gaps in coverage.  EDP is typically made up of three components:

1)      EDP Equipment- The servers, computer terminals, monitors, laptops, etc.

2)      EDP Media- The disk drives, disks, magnetic tapes, etc. on which data is stored.

3)      EDP Data- The information stored on the media such as facts, concepts or programs.

Covering Equipment and Media, is pretty straightforward.  However, since the value of technology changes so rapidly, critical to coverage is an understanding of whether your policy pays replacement cost or actual cash value.  Furthermore it is important to understand if the policy has a coinsurance penalty, and whether covered property must be scheduled on the policy or is offered with blanket limits. 

Replacement Cost – The cost to replace the damaged property with materials of like kind and quality, without any deduction for depreciation Actual Cash Value – The cost to repair or replace the damaged property, minus depreciation; or the damaged property’s fair market value Coinsurance – A provision that penalizes the insured’s loss recovery if the limit of insurance purchased by the insured is not at least equal to a specified percentage of the value of the insured property.  The provision specifies that the insured will recover no more than the following: the amount of the loss multiplied by the ratio of the amount of insurance purchased (the limit of insurance) to the amount of insurance required (the value of the property on the date of loss multiplied by the coinsurance percentage), less the deductible. Blanket – A single limit that covers several different properties or locations.

The most challenging area of EDP to insure is typically data.  However, data is often the most important and difficult area to replace.  Coverage for data is not standardized in the insurance marketplace.  Insurance companies may define data differently and offer different forms of data coverage.  Things to consider include: 

1)      Does your policy provide coverage for virus and hacking?

2)      Does it include coverage for a denial of access and provide business interruption and extra expense coverage? 

3)      Does your policy provide coverage to hire an expert in forensics to determine how your systems were hacked?

Standard EDP coverage typically comes with very low limits, and may not respond to some forms of damage to media.  It is important to understand the value of your technology as well as the financial impact related to business interruption and out of pocket expenses should a loss occur.   While this coverage is often overlooked, today’s business is extremely reliant on the systems and data that enable it to conduct business efficiently and effectively.  The professionals at Parker, Smith, & Feek understand the importance of educating our clients on the nuances of an insurance policy, and are happy to engineer an effective EDP insurance program for your organization.  

Comments

[Travel Insurance]

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