Insurance
Forum
by MARY LYNNE
BLAESSER, CIC
Past Insurance Columns
Q In the last year or so I have added quite a lot of computer equipment
to my business. I now have all my clients’ information, including their case
histories and their accounts stored electronically. I also bought a printer,
which I use constantly, and I’m thinking of getting a scanner. Is all this
electronic stuff covered by my existing office equipment and furnishings
insurance? I can not imagine what I would do if I lost all the critical data
that is now on my system.
A
This question is both timely and tricky. Insurance policies vary from company to
company in the manner in which they treat the coverage of computer equipment
(hardware), systems software, third-party software and company data and
databases.
An example of coverage from one insurance company reads as follows:
“We will cover your computer equipment, media, data, and programs up to a total
limit of $15,000 unless otherwise endorsed. [Meaning; additional coverage can be
purchased.]
“We will cover direct physical loss or damage to computer equipment, media, data
and programs, which you own, lease or rent from others or for which you are
legally responsible.
“We will pay the replacement cost of reproducing lost or accidentally erased
data, programs documentation and source materials provided you actually replace
or reproduce them.”
Things that might not be covered in a standard policy include: errors or
omissions in processing (except by direct loss of a covered peril; i.e. fire),
electronic or magnetic injury, disturbance or erasure of electronic readings
(except by direct loss or damage caused by lightning), or theft by employees of
data/records, even if theft is a covered peril on the policy.
So, the easy answer to this question of insurance coverage for computer hardware
and software is this: most companies will cover the actual physical equipment
and data to a specified limit for all perils covered in the policy. For example:
the coverage will apply if a fire destroys the electrologist’s equipment, it
will not apply if an earthquake damages your equipment unless you have
earthquake coverage. Earthquake coverage is not a standard coverage on most
business packages.
There are a number of things that the independent electrolysis practitioner must
consider prior to arranging for a policy that they expect will give them all the
coverage they need on their computer-related equipment: I suggest that
electrologists review the following Short List of questions before making any
commitment:
1. What is the replacement cost of your computer equipment
including scanners, and printers, and any built-in copiers or fax systems, etc.?
2. Does the carrier put a specific dollar limit on your
computer equipment or is the value just considered part of your business
personal property limit?
3. If your computer equipment value is higher than the
specified limit, is additional coverage available to you at an affordable cost?
4. Will your policy cover equipment in transit, such as a
laptop or notebook computer that you carry with you (in transit)?
5. Are you the actual owner or person responsible for this
equipment?
And another important reminder: Coverage for data is only available if you
replace it — so remember to always back up your data and remove the back-up
discs from your premises. You can’t replace something you don’t have!
To summarize: Coverage applies only for perils covered for all the
electrologist’s equipment and only to the limit of the coverage stated. So, the
electrologist who puts a value of $3,000 on her business personal property could
never expect to receive a “worst scenario” insurance payout of $10,000 (to cover
the cost of undeclared computer equipment).
The limit the electrologist sets for her property must include the value of all
her equipment. For example: If she figures that the value of her chairs, tables,
sterilizer, epilator and other professional tools and furnishings required for
business are worth $6,000, and she estimates that her investment in computer
equipment hardware, software and data adds a further $16,000, her policy should
specify business personal property coverage of no less than $22,000.
Past Insurance Columns
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