Water and electronics don’t mix, and damage to computers and hard drives is often one of the most expensive parts of a flood damage claim. However, it may be much cheaper for you to replace your hardware than to recoup the losses of all of the information and data stored in your system. With the advent of information technology, businesses are largely dependent on electronic storage of valuable information about their clients, processes, and operations—and losing these can mean the loss of your company. Attorney Bill Voss recommends that business owners take a hard look at their data loss policies, and make any changes to their coverage before the heart of their operations is swept away.
The Different Types of Data Loss and Liability Insurance
Data insurance can provide many different kinds of protections for the inner workings of your business. Not only can data insurance protect valuable e-business assets like network connectivity and electronic data, it can also prevent a backlash due to security breaches and limit your legal liability.
The most common types of data insurance include:
- Network security property loss. Companies try their best to keep personal information private and secure, but the risk of losing it remains. This protects you against corruption, theft, or damage of data from hackers or even your own employees.
- Crisis communication. This covers your expenses in communicating with your stakeholders and clients when you have an online crisis to assure them that it is still safe to do business with your company.
- Business interruption. Business interruption insurance compensates you for losses you may incur when your website or network becomes unavailable. This is essential for businesses that sell products or services online, like airline companies or online retailers.
- Lost or damaged electronic data. The permanent loss of client lists or business contracts could hurt a business beyond repair. Lost data coverage can help reimburse a policyholder in the event that lost data is not recoverable.
- Web content liability. This protects you against trademark, copyright, slander and other suits that may result from data posted on your website. This can include erroneous information on your website that causes damage to another person.
- Legal liability. This protects you against damage done to third parties due to security lapses in your network. An example would be if a virus is sent out from your office e-mail.
- Professional liability. This covers businesses that render professional services and that may be sued for negligent rendering of service. This can include companies that hire consultants or freelancers who may provide inaccurate information.
Estimating the Costs of Data Loss for an Insurance Claim
The first thing a company should do after the loss of electronic data is to take all necessary steps to recover the data. Even if computers and hard drives have been ruined, offsite servers and other backup storage may have copies of the information in storage. If no electronic source for the data can be found, companies may seek out offsite hard copies of information in offsite filing or other locations that have paperwork storage. Third parties may also be contacted to complete records, especially in cases where both parties received a copy of a document (such as a receipt or spreadsheet). Any of these actions can be costly and time consuming, and businesses will often rely on business interruption insurance to help offset data restoration efforts.
It can be extremely difficult to determine the value of the data that has been lost, especially if the information is unrecoverable. The costs of billable hours for reconstruction of the data, damage to the business’s reputation, and loss of existing clients could potentially amount to thousands or even millions or dollars. Since the cost of lost data can be substantial or even critical to the future of a business, owners are encouraged to protect their data—not only with insurance, but also through a comprehensive security and e-storage program.
There are many options available to prevent to loss of your business both before and after disaster strikes. Get the facts on these claims in our free report on commercial property damage or fill out the form on this page today to contact the Voss Law Firm, P.C.