Insuring Electronic Data Processing Equipment – Computers, etc.
Posted by McGroarty & Bradburn Insurance on
Most businesses are computer-dependent. Only the smallest retailer can operate without computer aid. Embedded chips and computers operate manufacturing equipment, contractors’ equipment and equipment found in hospital operating rooms. Rather than insuring computers as office or manufacturing equipment, the Electronic Data Processing (EDP) form protects hardware, software, media and other similar property. Coverage is available for hacking (unauthorized computer system access) and virus damage, power shortages, overload and outages.
Any commercial operation that owns and/or uses computers and other data processing equipment is eligible for EDP coverage. Commonly a policy covers hardware, media, programs/applications, data records, proprietary programs, loss of income and (on- or off-site) Website servers.
How EDP coverage applies depends upon the policy defines “computer hacking,” “computer virus,” “data records,” “media,” “telecommunications equipment” and other terms. Because technology is dynamic, liberal use of defined terms helps to preserve an EDP policy’s intended coverage.
Typically, coverage is provided against a specific list of events that can cause tangible loss to electronic equipment. Different coverage applies to major areas of EDP, such as hardware, software and Website servers. Covered businesses usually must comply with certain provisions to qualify for coverage, such as properly creating and storing back-up programs.
There are certain types of property that, generally, are ineligible for coverage under an EDP policy, such as:
Hardcopy accounts, bills, evidences of debt, records, abstracts, deeds, manuscripts, program documentation and similar property
Portable computers that are stolen or that disappear
Any property used for illegal transportation or that is contraband
Any property that is leased or rented to others
Currency, food stamps, lottery tickets, money, notes and securities
Property held for sale
A business must pay attention to how losses are settled, particularly are claims handled according to the current value of the lost equipment or according to what is necessary to replace the property? ACV settlement is a problem for companies that don’t regularly upgrade their EDP equipment. Technology changes so fast that payment for equipment purchased years ago is far less than what is needed to secure new equipment. On the other hand, replacement cost coverage would not be as critical for a firm that regularly changes equipment as damaged property would likely be newer.
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