Terrorism Insurance

On September 11, 2001, Americans began to view terrorism in a new light. Prior to that fateful day, terror attacks on a massive scale were possibilities that few people in this country ever considered. Today, with so many high-profile international conflicts making the news, American business owners and corporate strategists must factor in terrorism when creating risk management plans. One way to address the risk of terror attacks is with terrorism insurance.

Fortunately, a local independent insurance agent can help you find the right terrorism insurance. They'll help you protect your business against unexpected losses due to these catastrophes. Until then, here's a closer examination of terrorism insurance and why it's necessary.

What Is the Terrorism Risk Insurance Act?

The attacks on the World Trade Center in 2001 were unexpected and costly. In the aftermath, life insurance and commercial liability claims exceeded $31 billion, and about two-thirds of these costs were covered by reinsurers, or companies that insure insurance companies.

To prevent future acts of terrorism from bankrupting insurance companies and leading to even more financial disasters, former President George W. Bush signed the Terrorism Risk Insurance Act, or TRIA, into law on November 26, 2002. This temporary act was designed to allow insurance companies and the federal government to split the costs of covering losses from terrorism. It was renewed in 2005 and 2007, at which time the definition of terrorism was broadened to include domestic acts of terrorism.

Because this act presents insurance companies with a smaller risk of loss from a terrorist act, it opened the door for many insurance carriers to create terrorism insurance policies. With these policies in place and available to business owners, many insurance companies have ceased to provide coverage for acts of terrorism in standard commercial policies.

What Does Terrorism Insurance Cover?

Before 9/11, standard business insurance policies included terrorism coverage. Since then, insurers have started offering this protection separately for an additional cost. The cost of terrorism coverage varies depending on the current risk of these activities in your location.

Terrorism insurance can reimburse businesses for commercial property damage, business interruptions, and injuries or fatalities to staff due to terrorist activity. However, in business insurance, this coverage only applies if a terrorist attack is declared a "certified act" by the Secretary of the Treasury. This declaration isn't necessary for homeowners insurance or auto insurance because these policies don't exclude acts of terrorism.

Who Needs Terrorism Insurance?

Business owners may want to consider purchasing terrorism insurance to protect their companies, particularly during times of global unrest. However, most home insurance, condo insurance, renters insurance, and comprehensive car insurance policies include coverage for damages resulting from terrorism. As a result, adding terrorism coverage is typically only a concern for businesses and commercial policyholders.

Corporations located in large, heavily populated cities and those owned by high-profile, high-net-worth individuals who present a tempting target to malicious organizations may want to give terrorism insurance extra consideration. Additionally, companies that routinely send employees to hazardous parts of the world for business purposes may want to seek coverage. An independent insurance agent can help your business add an appropriate amount of terrorism coverage.

When Is Terrorism Insurance Included?

Terrorism is covered by many standard policies you likely already have. If you're already covered by any of the following types of insurance, your policy is unlikely to exclude terrorism coverage.

Homeowners insurance: This typically covers damage to your home's structure or dwelling and personal property or contents due to explosions, fire, and smoke resulting from acts of terrorism because these disasters are not excluded. Your policy may also cover additional living expenses if you're temporarily displaced from your home due to acts of terrorism.
Condo insurance: This typically covers damage to your personal property due to terrorist acts. However, the owner of your condo building would need to have purchased commercial terrorism coverage for coverage to apply to damage to common areas and the building's structure.
Renters insurance: This typically covers your personal property from explosions, fire, and smoke damage due to terrorist attacks. The property's landlord would need to have purchased commercial terrorism coverage to protect the actual building.
Car insurance: This typically covers damage or destruction to your vehicle from terrorist attacks, if you purchased comprehensive coverage.
Life insurance: This typically covers death due to acts of terrorism because these disasters are not excluded. Proceeds from the policy are paid to the designated beneficiary.
Health insurance and disability insurance: Certain policies cover injuries, illnesses, and fatalities resulting from acts of terrorism, but you'll need to check your specific policy.
Business interruption insurance: This typically covers temporary business closures due to terrorist attacks if the business is badly damaged and is inoperable until repairs are complete or if civil authorities restrict access to the business premises after an attack.
Workers' compensation insurance: This typically covers incidents of employee injury, illness, or death due to terrorist attacks because this coverage cannot be excluded. Further, workers' compensation is the only type of insurance that is never allowed to exclude coverage for acts of war.

Ask your independent insurance agent to review your existing insurance policies with you to be certain of whether coverage for terrorist attacks is excluded. You can also usually buy travel terrorism insurance to protect you in case a trip is canceled due to terrorist activity or in case you suffer from injury or property damage while traveling abroad. You may also be able to add kidnapping and ransom insurance in case a terrorist abducts you.

What's Not Covered by Terrorism Insurance?

Terrorism insurance comes with certain exclusions that are important to be aware of. These often include:

Declared acts of war
Nuclear, chemical, radiological, or biological acts of terrorism

Acts of war are fundamentally uninsured for every type of coverage other than workers' compensation. Manmade catastrophes have also been declared fundamentally uninsurable.

How Much Does Terrorism Insurance Cost?

The cost of terrorism insurance varies depending on the nation's current risk level for terrorist attacks and activities. Your coverage premiums may also vary depending on the size of your business, its operations, and other factors. Your independent insurance agent can help you find affordable terrorism insurance near you.

An Independent Insurance Agent Can Help You Find the Right Terrorism Insurance

When you're ready to protect your business against losses due to terrorism, no one's better equipped to help than independent insurance agents. A local independent insurance agent can help simplify this process by shopping multiple carriers for you and providing you with several terrorism insurance quotes quickly. They'll find you the policy that provides a blend of the best coverage and cost. And down the road, your agent can even help file business insurance claims for you and update your policy when necessary.

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