EDP and Cyber Liability

Insurance Policies for the Digital Age

The modern business is more intimately intertwined with technology than ever before. However, this dependency leaves us vulnerable to digital and hardware-related crises.

With millions of dollars being lost each year to data breaches and hardware damage, it’s no wonder many businesses are turning to two new safety nets to secure their futures: electronic data processing insurance and cyber liability insurance. Both are designed to protect technological assets, but they differ in a few important ways.

Electronic Data Processing (EDP) Insurance

Though they vary widely, EDP policies typically cover damage to your business’s hardware as well as the data contained within. This usually includes equipment like personal workstations, servers, and modems, but it also extends to software and many types of data and media. While EDP policies are usually used to fill holes left by the exceptions in standard commercial property policies, it’s important to note that they only sometimes cover damage resulting from unauthorized access or malware. Instead, most cover electrical disturbances, mechanical breakdowns (a bigger problem than many business owners realize), service interruptions, floods, earthquakes, and other disastrous events. In addition, most cover costs associated with data recovery.

EDP insurance often comes highly recommended to businesses of all sizes that depend heavily on computers for their day-to-day work. But

it’s important to note that EDP centers around physical damage and the associated costs — not just the intangible impacts of hacking. The next option may be more suited to companies that store a large amount of customer data.

Cyber Liability Insurance

In contrast, cyber liability insurance usually protects businesses from the costs associated with data breach due to cyber attacks, like viruses or ransomware. In addition, most policies cover any resultant lawsuits following a data breach or failure to protect sensitive data belonging to a third party (like a customer’s credit card information), costs associated with digital crisis management, and data restoration expenses.

Like EDP insurance, cyber liability is usually recommended for any company that uses the internet for basic operations. But it’s especially important for companies that store data belonging to others on their computer network, sell a lot of products and services, or have a well established web advertising presence.

Before you go hunting for the best policy, though, be aware: Both EDP and cyber liability insurance vary widely depending on the policy, and they sometimes overlap in their coverage. Work with your agent or broker and your IT service provider to determine your specific needs.