EDP Coverage
Electronic Data Processing coverage protecting computer hardware, software, data, and media from physical damage and data loss.
What It Is
Electronic Data Processing (EDP) coverage is a specialized form of commercial property insurance designed to cover computer hardware, software, and data against physical damage and loss. While standard commercial property policies cover computer equipment as business personal property, the coverage is often inadequate for technology-dependent businesses because of valuation limitations, media coverage gaps, and exclusions for data restoration.
EDP coverage addresses several gaps in standard property forms: it covers the cost of reproducing or restoring data and software (not just the physical media), provides coverage for mechanical and electrical breakdown of computer equipment (excluded by standard property forms), covers extra expenses for temporary equipment rental during restoration, and may cover business income loss specifically attributable to EDP system failure.
EDP policies or endorsements can be written on an all-risk or named-peril basis. The all-risk version is recommended for comprehensive protection. Coverage limits are typically set at the replacement cost of all hardware plus the estimated cost to recreate or restore all software and data.
Why It Matters for Brokers
Every modern business depends on technology, but many commercial property policies provide inadequate coverage for computer systems and data. Brokers who identify EDP exposure and recommend appropriate coverage protect clients from potentially business-ending losses. The cost of data restoration alone can exceed the value of all physical computer equipment, making EDP coverage essential for data-dependent businesses.
Real-World Example
An architecture firm has $120,000 in computer hardware and $850,000 in proprietary design files, project archives, and licensed software. A power surge destroys two servers and corrupts 60% of the firm's data. Standard property coverage pays $45,000 for the damaged hardware (depreciated) and $200 for the physical hard drives (the 'media'). EDP coverage pays $120,000 for hardware replacement at full replacement cost, plus $185,000 for data recovery and software reinstallation. Total EDP claim: $305,000 vs. $45,200 under standard property.
Common Mistakes
- 1Assuming standard commercial property coverage adequately protects computer systems and data—it typically covers only the physical equipment at depreciated value.
- 2Not accounting for data and software restoration costs when setting EDP limits—data restoration often costs more than the hardware itself.
- 3Failing to recommend EDP coverage for professional service firms (architects, engineers, accountants) whose primary business assets are digital.
How brokerageaudit.com Handles This
brokerageaudit.com's Policy Checker identifies technology-dependent businesses and verifies that EDP coverage is in place with adequate limits for both hardware replacement and data restoration. The system estimates EDP exposure based on industry benchmarks and flags accounts where standard property coverage is the only protection for significant computer and data assets.