Electronic Data Processing Coverage: What is it?

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What is EDP Coverage?

EDP Coverage—short for Electronic Data Processing Coverage—is an insurance that covers electronic data processing equipment such as computers, as well as media/computer programs, and data stored within the devices. It’s also referred to as Computer Coverage, Data Processing Coverage, or EDP Insurance. The property your business uses can be costly to replace. If your business relies on computers and the data stored therein for everyday business, this is a coverage you cannot skip. 

What is Covered with an EDP Policy?

Electronic Data Processing Coverage typically includes three different categories of coverage:

Computer/Hardware

What devices or property are covered typically under an EDP policy? Electronic data processing equipment that is typically covered include:

  • Servers
  • Desktop computers
  • Laptops
  • Monitors
  • Smartphones
  • Tablets

Some insurance companies will also include printers, scanners, and phone systems. When you’re in the process of purchasing this insurance, be sure to clarify what is covered under the hardware portion of the policy. If your computer is a leased piece of equipment, make sure that is not considered an exclusion under your policy. 

Software/Data

EDP endorsements (and of course the policy itself) covers the software on your computer (think programs, systems, applications, etc.) as well as any data stored locally on the hard drive. 

Media

Media is often grouped under software/data. However, some insurance policies have it written separately. Media is what data is written on, such as discs, drums, tapes, memory cards, etc. 

What Type of Damage is Covered?

Usually referred to as “covered perils”, this is the cause of the damage sustained that is covered. Most electronic data processing policies will cover damage from:

  • Temperature/humidity changes
  • Power surges
  • Mechanical breakdown
  • Computer virus
  • Computer hack
  • Short circuits
  • Fire
  • Storms

Most policies are “all risks” meaning that nearly everything is covered, including property damage caused by floods or earthquakes (which is often excluded under commercial property insurance policies). 

Potential Exclusions from Electronic Data Processing Policies

While most policies cover all risks, there are still some things that aren’t typically covered (or can be covered under different insurance policies). What might not be covered?

  • Physical property such as papers, bills, records, etc.
  • Property that is physically lost or stolen
  • EDP Equipment that is being used for purposes that are illegal

Each insurance company may have its own list of exclusions, so be sure to ask what might be excluded from coverage.

Actual Cash Value vs. Replacement Cost

When you’re purchasing this insurance policy, it’s important to choose the proper type of replacement option for your property. Most often, you are choosing replacement cost vs actual cash value. What’s the difference?

Replacement Cost: This will provide the money to replace your computer with something of like kind and price. It is sometimes referred to as “functional replacement cost” in EDP policies. 

Actual Cash Value (ACV): ACV is the cost to replace the property, minus depreciation. So you’re being compensated for what the computer is worth at the time it was damaged or destroyed—which may not be enough to replace the computer with a current working model

If your software or data is damaged or lost, the insurance company typically replaces it outright or pays for the cost to reproduce it, when possible. 

Other Coverages that can be Included Under EDP Coverage

Some EDP Coverage policies include endorsements for additional coverage, such as: 

Business Interruption Insurance: Often referred to as “Business Income and Extra Expense”, this insurance can cover the costs your business faces if your equipment is damaged and it causes downtime for your business. It can include expenses such as renting other equipment, moving offices, payroll, taxes, and so forth. 

Cyber Liability Insurance: If hacking or a cyber attack is an exclusion from the EDP coverage, cyber liability can be purchased separately to cover loss of data, client notification, and paying for credit monitoring for clients.

Offsite coverage: Some EDP policies will cover your EDP equipment when used outside of locations other than the premises listed on the policy, including:

  • EDP equipment in transit
  • Newly acquired EDP Equipment
  • Equipment at a new premises
  • EDP equipment used offsite

Questions to Ask Insurance Companies

When you’re shopping for coverage, these are some questions that you must ask:

  • What equipment is covered? Is anything excluded?
  • Are there any excluded perils on the policy? 
  • Is mechanical breakdown coverage included?
  • Are losses caused by viruses or hacking covered? 
  • Is business interruption coverage included in the policy?
  • Will the policy cover hiring a forensic expert?
  • Can I choose between replacement cost or actual cash value? 
  • How is the value of the equipment calculated for replacement?
  • Is employee sabotage or accidental deletion covered?

Get a Free EDP Coverage Quote

You want to make sure your expensive EDP property is covered if an unforeseen accident is to occur. If you'd like to have a conversation with an agent and get a free data processing EDP insurance quote, complete the form at the top of the page or give us a call at 1-877-907-5267. Our agents will gladly help you find the coverage you need to protect your small business.

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