Data Center Insurance

Data center business owners might think their business is low-risk compared to others. Unfortunately, even a trivial lawsuit can still have a serious impact on your business, whether you're just starting your business or are well established.

Here’s a closer look at some key insurance products and why you should carry them:

• Technology errors and omissions insurance, sometimes called tech E&O or tech professional liability insurance, is a bundle of E&O with cyber insurance. This policy can help you with legal fees and court costs if a dissatisfied client sues you over your work performance or a third-party cyber incident. It covers the cost of customer notification, credit monitoring, legal fees, and fines.
• Business owner's policy (BOP) combines general liability coverage with commercial property insurance at a discount. It protects against common third-party lawsuits and business property damage.
• Commercial property insurance covers your business property and equipment if it's damaged, lost, or stolen at your fixed business location. Should your machinery or equipment suffer a mechanical or electrical failure, equipment breakdown coverage would provide the funds to repair or replace the damaged equipment.
• Electronic data processing insurance covers electronic devices such as computers, storage devices, and the data they contain during a power surge, fire, natural disaster, or similar incident. Also known as computer coverage or data processing coverage, EDP insurance can help protect your business income against financial losses from data corruption or loss.
• Business income insurance, also known as business interruption coverage, offsets your lost income when your business is forced to close because of a covered peril, such as property damage. These funds help you cover your normal operating expenses until you can resume business operations.
• Employment practices liability insurance (EPLI) safeguards your business if you're sued by an employee over wrongful termination or another violation of employee rights. EPLI can also be added as an endorsement to a general liability or business owner's policy.

Carrying the right insurance coverage makes it easier for data center businesses to protect their livelihoods and qualify for contracts and leases. Depending on your state, some policies are required by law.

In most cases, workers' compensation coverage and commercial auto insurance may be required if you have employees and own a business vehicle. If your IT infrastructure business doesn't have employees or uses personal vehicles for work, your insurance requirements will differ in that you won't be required to obtain workers' comp and will need HNOA insurance instead of commercial auto.

Even when not required by law or regulations, there are several reasons why data center insurance is important:

• Financial protection: Because data centers are extremely expensive to operate and maintain, insurance provides a financial safety net should anything happen to your business.
• Trust: Insurance reassures your customers that you're committed to protecting their data from vulnerabilities and maintaining smooth service for them.
• Compliance: In order to obtain certain contracts or sign leases, your business may be required to carry specific types of insurance.
• Risk management: With the right insurance coverage, you're better prepared to handle and recover from various risks, including malicious data breaches and weather events/natural disasters.
• Investment opportunities: Investors are more likely to partner with your data storage business when it's adequately protected from potential risks and exposures.

When buying tech E&O and cyber insurance, you may come across the following terms:

• First-party cyber insurance: This coverage covers cyber risks at your own business, such as a data breach that exposes your customers' email addresses or other personal information stored by your company. It's also called data breach insurance.
• Third-party cyber insurance: A third-party cyber policy covers your responsibility for cyber risks that harm another business. For example, your data center might offer security services to your clients. If a weakness in that security causes your client's data to be exposed, then your data center could be held liable for the breach.

You can typically add first-party cyber coverage to your general liability insurance or business owner's policy. Third-party cyber coverage is included in tech E&O insurance, which bundles cyber insurance with errors and omissions insurance.