The guide to insuring data

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When considering an insurance plan, many business owners think of what they can’t afford to lose. The equipment that produces your product is important, of course, but one of the most valuable aspects of today’s businesses is data.

“People have to be careful because they will insure equipment and media, but people have to check their policy to see if there is coverage for data,” says Nancy Zollo, CPCU, AIC, senior claim representative with Hortica®, a brand of the Sentry Insurance Group. “Some policies may provide coverage; however, it may be an optional endorsement. You really need to know your insurance policy.”

Hardware failure, lightning strikes, power surges and fluctuations can all leave you without that precious data. Physical storms are a major culprit, and usually lead to a longer-term outage and suspension of your business.

In insurance terms, lightning and fire are considered standard perils. Power surge isn’t always covered, so check your policy.

Storm surge is often part of a hurricane. Most insurance policies do not cover this peril, but The Federal Flood Program is an option to cover Business Personal Property, which includes computer equipment. Because data recovery may be an out-of-pocket expense for the affected business, any and all precautions will only help post-storm.

What to protect

From an accounting and bookkeeping perspective, sales, inventory, payroll and income statements are crucial. You might have an accountant who takes care of this part of the business, but many smaller retailers and growers may not.

“Those records are key in the event of a loss, whether it’s a failure of [a] hard drive or physical damage from a hurricane or tornado, because you want those available to reload, to get back in business as soon as possible,” Zollo says.

Income statements are particularly important if you have business income insurance. In the event of a claim, you will need them to show your carrier your typical income for a given time period. Insurance companies prefer monthly profit and loss statements, because they are the most up-to-date, but quarterly reports may suffice.

“You have to have data — we can’t just guess,” Zollo says. “Especially if you’re seeing an uptick in income. Even if you can say, ‘I’ve implemented a new business plan, I’ve added service XYZ, and my sales this year are up 25 percent from last year,’ you have to be able to prove that trend. A claim representative will look at historical data to show what income you should have seen if not for the loss. If you’ve made changes or if you have an upward trend, it’s important to meet with your accountant quarterly. You want to be able to document that.”

Preset sales agreements, equipment leases, corporate records and existing contracts that are suspended at the moment but may be picked up again are more examples of data to protect. LLC documents and payroll records would be a major headache for a business that lost them in a disaster.

“Anything with a raised seal needs to be safe,” Zollo says. “To reproduce those would take time and expense.”

In the horticulture industry, smaller nurseries and greenhouse growers may keep track of their own payroll. Zollo highly recommends these growers back up that data — even if it is a manual process. You may need to be able to prove what you’ve paid to which employee.

In addition to financial data, it is important to protect your customer database. If your hard drive is wiped out from a storm surge, or your facility is lost in a tornado, you need to be able to know who still owes you money and who’s scheduled for a delivery. When your business gets back on its feet, you’ll need those customers.

“You could have a fire in your main production building, but still have plants outside you can still sell,” Zollo says. “So you need your customer information so you can get shipping as soon as possible.”

How to protect it

There are two main options for backing up your data: manually copying files to a disk or external drive, or using an outside service to automatically back up your files to a remote location.

If you do it yourself, Zollo has a few tips: check the backup to make sure the copy actually worked and you could use it, if necessary. Next, get the backup away from the business — at home or with your accountant. Your backup won’t do much good if it’s lost in the same disaster as the original.

There are also network-attached storage options —separate servers for saving data that can be set for automatic backups.

There are also cloud storage options that give a small amount of space for free. The major advantage to these is that data entered syncs between multiple machines.

“If you’re evacuated for a hurricane, you can grab your laptop and whatever you can and you go,” Zollo says. “If your place has severe damage, with the cloud-based options you can sync your data with your laptop and start notifying customers while you’re away.”

Zollo says the cloud-based backup can be a good option for small to midsize businesses. A large wholesale nursery or retailer may consider an internet provider that provides encryption, more space and more options for a fee.

— Matt McClellan

Disclaimer: This document is of a general nature and is not intended to address the circumstances of any particular individual or entity. No one should act on the information contained in this document without advice from a local professional with relevant expertise.