I am starting up a small IT business that will focus mainly on Data security and recovery as well as off-site data storage for local companies. I will have only a couple employees including myself at first. Do I need Fidelity Bonded Insurance and does this protect myself from any lawsuits from customers that may experience compromised data in case one of my employees screws up?
Reason I'm asking is that most of my customers will be Banks, Lawyers and Pharmacies. (very confidential data in other words)

Ask your insurance agent.    I have 4 Million in coverage on mine but it is only E&O and business insurance.   Not quite the same business model though.   And no Bond.

Once you have employees and they will have access to confidential customers' data, I think you need to have fidelity bond.
You need to have a good talk with your insurance agent.

Thanks for the info. I want to make sure I have all my bases covered because of all the confidential data.

Most companies wont touch you without one and forget any kind of government work without the proper insurance.