Canadian Accredited Insurance Broker (CAIB) Two Practice Exam

Which of the following is NOT an area of coverage under an Electronic Data Processing Policy?

1. Loss to data processing system

2. Coverage for hardware failure

3. Active data processing media

4. Extra expense incurred

The correct answer is: Coverage for hardware failure

The area of coverage under an Electronic Data Processing (EDP) Policy is specifically designed to protect a business's electronic data processing systems and the associated data. This policy typically covers a range of potential losses, including those related to the loss of data itself, active data processing media, and the extra expenses that may be incurred due to system disruptions. While it may seem intuitive that hardware failures would fall under an EDP policy, such failures are generally covered under a different type of policy, like a commercial property insurance policy. EDP policies focus more on data integrity and information processing capabilities rather than the physical hardware per se. Hence, coverage for hardware failure does not typically fall within the purview of the EDP Policy. The other options listed, including losses to the data processing system, protection of active data processing media, and extra expenses incurred, are indeed integral parts of what an EDP policy is designed to cover. Each of these components ensures that the business is protected against disruptions and losses that could significantly impact operations due to issues related to data processing and management.