Data loss can ruin everything from your vacation photos to your client database. And data recovery can be expensive. Chances are that if you require this service and end up with a hefty bill, one particular thought may cross your mind. That thought may be, “Does my home insurance policy cover data recovery?”
It’s a fair question and one with an answer you should be able to find out by contacting your insurance policy provider and asking them point-blank.
But generally speaking, the average home insurance policy will not cover data recovery costs. However, there are a few exceptions. In a moment, I will go over them for you.
Most business insurance policies do include data recovery coverage, but there are also exceptions. Here is a closer look at what your home and business insurance policies say about data recovery.
It really depends on how the data was lost. For example, if your data was lost due to flooding, a fire, or an earthquake, most home insurance policies will cover your data recovery costs. If the cause of your data loss was something other than flooding, fire, or earthquake, it is probably not going to fall under your policy coverage.
That is the way home insurance policies work. The cause of the loss is the determining factor, rather than the fact that your data is lost.
So, if your dog chewed up your USB drive, or you accidentally tipped a working hard drive over, your home insurance policy is not going to be very helpful when you start looking at the data recovery bill. If your hard drive somehow found its way to the bottom of your swimming pool and there was a party in your backyard the night before, don’t expect it to be covered.
It is also important to know that insurance companies will do their research on such a claim. They will contact data recovery service providers to confirm the cause of the data loss and may deny coverage if they determine that the claim does not match the actual cause.
This means that reputable data recovery service providers are not going to lie about their findings. It’s not worth it to them. In other words, you shouldn’t lie about it in your claim, either.
Business Insurance
It is common for most business insurance companies to claim that your data is safe, as they will cover the costs of data recovery in the event of a data loss. However, as simple as that sounds, it gets a bit tricky.
Disclaimer: It’s a good idea to contact your business insurance policy provider and review (in great detail) the policy’s provisions regarding data recovery.
Here’s why… If your hard drive fails due to regular wear and tear or is accidentally dropped, most insurance companies will provide coverage for your data recovery costs. Remember, the insurance company will seek proof of these incidents.
But there is an “only” in here. Those data recovery costs will be covered ONLY if the files that were lost are so important that without them, you are unable to provide your services to your customers. This means that those files must be crucial to the operation of your business and your relationship with your customers.
Remember, the insurance company will review your claim to verify the importance of the lost data. It’s all part of the routine. Insurance companies investigate claims, and they take false claims seriously.
But there’s more.
Cost is another huge factor. If the cost to recover your data is somewhere between $500 and $1,000, most insurance companies will have no problem covering the cost and closing the claim. It’s quick and easy from their perspective, and they can process another claim once yours is out of their system.
However, if your server failed and you are now looking at costs falling somewhere in the $20,000 to $50,000 range, expect some resistance. When the data recovery cost is that high, insurance companies generally find any possible way to avoid paying the full cost. That’s how they resist.
If you are lucky, you may end up with partial coverage, but it won’t be much. Expect a small fraction, possibly less than 50% of the full claim cost. Again, it can’t be overstated – check with your insurance provider to learn exactly where you stand on data recovery claim coverage.
Am I Still Under Warranty?
There is one way to cover your data recovery costs if your insurance policy doesn’t provide coverage. Sometimes, a manufacturer’s warranty can provide what you need.
Typically, if the situation surrounding the data loss is not complex and does not require the use of a clean room, you may get your data recovery covered. The easier the recovery, the better for you, provided that the device is still under warranty.
If you are considering purchasing add-on warranty coverage from your hard drive manufacturer, beware. In most cases, if the data recovery costs are too high, the manufacturer may opt just to refund you the cost of your policy rather than attempting to resolve your data loss, which could result in a price tag of $1,000 or more. But that doesn’t mean you should stay away from add-on coverage, as it can be a good option.
Add-Ons
As data recovery can be somewhat expensive, insurance companies often increase premiums. There are also insurance policy add-ons that can be added to your policy. All you have to do is contact your insurance coverage provider.
You can pick and choose which failure scenarios you want to cover and the ones you don’t. Not all insurance providers have this option, but most do.
Ransomware and Cyber Attack Coverage
Although most business insurance companies swear that they provide coverage against cyber attacks, including Ransomware, this also gets a little tricky. Ransomware is quickly becoming the new plague within the business world, and it is just getting worse by the minute.
It is also no secret that Ransomware can sometimes cost a business hundreds to hundreds of thousands of dollars. That is, if the company that has been targeted chooses to pay the ransom. It can cost even more if the business suffering from the Ransomware attack opts to rebuild from scratch.
So, cyber attack insurance can offer Ransomware protection, but it is crucial to carefully review the terms and conditions of your specific policy to understand the scope of coverage fully.
Understand that insurance companies will investigate claims to determine the origin of the ransomware and which computer was first infected. Should their investigation reveal that the infection resulted from inattention or negligence, expect them to deny the claim or offer just partial coverage.
Additionally, if the insurance company investigation determines that the infection resulted from an employee visiting adult websites and downloading files, expect the claim to be denied. Your data recovery costs will not be covered, as the insurance company will state that it is your responsibility to monitor what your employees do online.
That is why it is so important to take the time to carefully review the terms and conditions of your specific insurance policy. This provides you with the necessary information to fully understand the scope of coverage.
Final Thoughts: Don’t Assume You’re Covered
Whether your data is from your home or business, data recovery costs can spike for various reasons. It is because of the potential loss of data that you turn to insurance policy providers for some form of protection. While insurance may be your safety net, parachute, or lifeline, it is not normally as straightforward as that.
As is the case with most things these days, there are caveats and exceptions. To ensure your data recovery claim does not fall through the cracks and is denied, it is always a good idea to do some of your own research. The best course of action is to contact your insurance provider and review your data recovery coverage closely.
Look for red flags or gaps in coverage that may render a claim null and void. Then seek the advice of that insurance provider for options to add to your existing policy to cover the possible scenarios specific to your situation. Not all insurance companies will offer the add-ons you require, and it is okay to shop around for one that does.
Also, beware of insurance companies that claim to provide full coverage from cyberattacks. Take a hard look at those policies as well to ensure you have the right coverage to meet your needs. After all, the last thing you need is to have a major data loss and discover, after the fact, that something related to the cause of the loss was enough to make the insurance company deny your claim.
If you’re not sure whether your policy covers data recovery, it’s worth reaching out to your provider today — before disaster strikes.
About the author
Yevgeniy Kapishon is a hardcore techno enthusiast, senior data recovery engineer, and blogger at ADRS® Aesonlabs Data Recovery Systems. He lives in Toronto, Canada, and enjoys wandering the back alleys of his neighborhood or watching his favorite sci-fi flicks in his free time.
This content is from a contributor and may not represent the views of Tech Help Canada. All articles are reviewed by our editorial team for clarity and accuracy.
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