On September 11, 2001, Americans began to view terrorism in a whole 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 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 insurance coverage.
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, 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 in 2007, at which time the definition of terrorism was broadened to include domestic acts of terrorism. It is currently set to expire in 2014 unless Congress renews it again.
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 their regular commercial policies.
Terrorism insurance coverage can provide compensation for destruction, injury or loss-of-life that is caused by certain destructive acts, foreign or domestic, that are declared to be acts of terrorism by the U.S. Secretary of Treasury. However, terrorism insurance will usually not cover damages resulting from declared acts of war or from nuclear, chemical, radiological or biological acts of terrorism.
In many cases, terrorism insurance may include other options. For example, travel terrorism insurance may provide reimbursement if a trip is cancelled due to an act of terrorism, or if you should become a victim of a terrorist act while abroad. Another option includes coverage for kidnapping and ransom should you be abducted by a terrorist.
The Insurance Information Institute estimates that the average terrorism insurance policy runs about $20,000 per year, which, of course, is not a feasible expense for most individuals. However, most home, condo, rental and comprehensive vehicle insurance policies will provide coverage for damages resulting from terrorism.
Those who might want to give this coverage serious thought include corporations located in large, heavily populated cities, and high-profile, high-net-worth individuals who present a tempting target to malicious organizations. Additionally, companies that routinely send employees to hazardous parts of the world for business purposes may want to seek coverage.
Deciding whether or not terrorism insurance is right for you or your company is not an easy decision to make. If you have several disaster contingency plans in place, various business locations or dedicated temporary office space available, you may be able to continue business operations successfully without added insurance costs. However, if your business is based entirely in one location, or if a sudden, unexpected act of terror could potentially halt all business operations, this coverage may help prevent financial ruin.
If you want to learn more about this coverage, seek out reputable insurance experts in your area. You can check insurance rating agencies online to make sure you're working with a qualified company with a strong reputation for service. You may need to contact several organizations before you find the ideal coverage for your situation, but this research can really pay off in the long run.