Insuring Electronic Data Processing Equipment

Commercial Property Insurance

Electronic data processing equipment is tangible hardware that accumulates, processes and stores data. Computers, laptops, tablets, phones, servers, mainframes and networks are all examples of EDP equipment.

Most businesses are computer-dependent, and only the smallest retailer can operate without a computer cash register. 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) insurance coverage form commonly covers: 

  • hardware
  • software
  • media 
  • programs/applications
  • data records
  • proprietary programs 
  • loss of income
  • (on- or off-site) Website servers
  • Other similar property

How EDP coverage applies depends upon the policy definitions of key terms, including "computer hacking," "computer virus," "data records," "media," "telecommunications equipment" and others. EDP policies have many defined terms because technology is dynamic. Liberal use of specific policy language helps to preserve an EDP policy's intended coverage. 

Coverage generally is available for:

  • hacking (unauthorized computer system access) 
  • virus damage
  • power shortages
  • overload 
  • outages

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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