Protect your assets: the lowdown on property, liability, disability, auto, and office equipment policies - Special Guide to Insurance - includes related articles on how to find an agent, comparing insurance costs and organizations that rate insurance companies - Tutorial

Home Office Computing, March, 1994 by Linda Stern

The premiums for an errors-and-omissions policy vary broadly depending upon your business. Occupations that carry higher liability risk, such as architects, pay higher rates. Tiedgen offers the example of a software writer. A mistake made in a child's computer game carries lower risks than one in a program for air traffic controllers.

Data Insurance If you have data on your hard drive that you absolutely cannot afford to lose--and who doesn't?--buying insurance isn't really the right solution for data protection. Software backup is. So put this magazine down right now, back up the irreplaceable data on your hard-disk drive onto a disk or tape cartridge, and store the backup in a secure place, such as your bank safe-deposit box. That's the best data insurance you can buy, say most insurance professionals we spoke with.

Data insurance that's policy based is a lot more convoluted. You can buy policies that will recompense you for lost data on disk or paper; these are sometimes termed important paper policies and are wrapped up in commercial liability packages. Aetna's new home- business policy mentioned previously, for example, includes $2,500 for important data lost to fire, theft, and the like.

Other policies cover loss of data through their EDP policies, also attached only to commercial policies. The computer-specific policies from Safeware discussed above offer limited coverage for loss of data as part of their freestanding policies. And many commercial policies include accounts receivable and business interruption coverage relative to lost data: If your records of who owes you money are wiped out, you may not be able to collect that money.

But this is a catch-22, notes Neville. If your accounts receivable records are wiped out, you may not be able to collect the insurance, either. To back up your claim, you must demonstrate- either with some record reconstruction or past history--that you would have billed or worked a certain amount during a specific time. And if you can do that, why not just collect your lost accounts receivable?

Data insurance is priced according to the cost of reconstructing the data--keying it back into the computer--and that restoration is what most policies pay for. Minimum premiums can run $250 to $500 with typical deductibles of about $250, notes Tiedgen, who adds that you can buy a pretty good hardware backup system for the same amount of money.

Disability Insurance You're unlikely to find any insurance agent who will tell you that you don't need disability coverage. But a surprising number of business people-including those who are expert, such as Alfred Miller, a New York attorney who specializes in insurance matters--admit that they don't buy disability coverage for themselves and see its value as limited.

Miller says, "I personally think that one should think 10 times before buying disability income insurance." Home-based business people can often keep at their livelihood even with injuries or illnesses that would keep a commuting laborer off the job, he notes. "They pay at least a partial premium for something that's unlikely to happen," says Miller. With his advice, however, Miller seems to be overlooking possible problems like hand injuries due to repetitive stress syndrome, which could keep you off your computer for months on end. Such problems are why you must take advice to skip disability insurance with a grain of salt.