Business Owner’s Guide to Electronic Data Processing (EDP) Coverage

Almost all businesses now use computers, so it’s important to protect the value of equipment responsible for facilitating business activity. Insurance plans called Electronic Data Processing (EDP) policies are available to businesses that invest in hardware and software. Here’s a look at electronic data protection coverage for your company to mitigate the effects of a data breach.

What is electronic data processing coverage?

Electronic data processing coverage is insurance that protects your hardware, software, media, and data if it gets damaged by a specific disaster, such as a cybersecurity breach. This electronic data protection coverage usually also pays for damage caused by fires, floods, and wind. Some plans pay the cost of restoring software and data.

Without EDP coverage, your business might face expensive lawsuits from customers, partners, or even employees if their data is compromised. Businesses must put increasing focus on cybersecurity and meeting current technology standards.

What does EDP coverage include?

EDP insurance covers three main areas: hardware, software, and media. Hardware includes desktops, laptops, and workstations. Depending on the policy, it might cover phone systems, scanners, and other technology beyond computers. The coverage generally includes software applications as well as data systems. Media is any electronic storage for files such as discs.

What types of “perils” will be covered?

An EDP policy’s main perils are common disasters beyond people’s control, such as fire, wind, floods, and extreme temperatures. Some policies also list power surges, mechanical breakdowns, and electrical disturbances as perils. Most policies protect against cyberattacks, unleashed viruses in a network, causing severe damage to multiple computers. An EDP policy may even cover when an employee becomes a hacker.

How is the value of electronic equipment calculated?

Like a commercial business policy, EDP plans use three ways to calculate equipment value: actual cash value, replacement cost, and functional replacement cost. Actual cash value reflects what the item would cost to replace minus depreciation. Replacement cost is what you would pay for a new item. Functional replacement costs may involve considering old equipment that is no longer serviced.

Ensure you have the right commercial insurance coverage

Electronic data processing (EDP) insurance is necessary if your business depends on computers. There are various other types of insurance to consider for your business. The most common business insurance policies include general liability, commercial property, and auto coverage. You may consider other options, such as business interruption and product liability insurance. If your company hires employees, you’ll need workers’ compensation.

Don’t let hackers wipe out your business. Build strong cybersecurity layers and get the right insurance coverage to protect against data breaches. Contact us at Locke Insurance Group today to learn more about the various types of insurance essential for business.

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