Got It Covered?

Protection Plan

Before purchasing any kind of coverage, carefully analyze the risks involved in your particular business. Consider your location, industry and overall reliance on the computer equipment, and then formalize the best protection plan, says Sean Mooney, author of Insuring Your Business: What You Need to Know to Get the Best Insurance Coverage for Your Business (Insurance Information Institute). In most cases, this will include purchasing some kind of insurance coverage for computer systems, but it may also include setting up standard procedures to back up data, among other things.

Once you develop a protection plan, find an insurance agent who is knowledgeable about your industry and is familiar with the types of risks your computer equipment and data are regularly exposed to. It's also a good idea to check with a professional or trade association for recommendations on the type and amount of computer coverage that businesses like yours generally require.

Computer equipment in homebased businesses is usually covered by your homeowners or renters insurance, but keep in mind that this type of coverage is often very limited. Contact your insurance agent to determine the replacement limit on your business equipment. If necessary, get a rider to boost the coverage or purchase a separate business owner's policy that includes adequate coverage for your computer equipment.

For other businesses, a standard business owner's package, or BOP, will generally provide adequate coverage, Mooney says. Under a BOP's property policy, damage to computer equipment from a fire, flood, theft or vandalism is usually covered.

Some BOPs also cover your costs to recover any data stored on your business's computers if it is damaged or lost. It's often very expensive and difficult to retrieve important documents. However, you can purchase insurance that will pay to have those records retrieved or recreated. Check to see if this is included in your insurance plan already, and if not, consider adding this coverage.

If you or your employees take notebook computers or other equipment along while traveling, find out if your BOP covers business equipment outside the office and how much is covered. Many will cover business equipment against theft anywhere in the world. If yours doesn't, you probably have the option to get a rider that protects your computer equipment from theft on the road. Or you can buy what's called a "floater," a form of insurance that covers movable property like computer equipment as long as it's within the territory limits imposed on your contract. Floaters generally run less than $1,000 annually.

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Got It Covered?.

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