Posted by: Christopher Turnbull | May 3, 2011

Insuring Terrorist Acts

I wonder if Osama Bin Laden had life insurance. Probably not.  After all, the insurance companies probably don’t have adequate pricing or actuarial tables for someone with the occupation of “terrorist”. This does bring up a good question though. Are terrorist acts ever covered by insurance? Want to guess if your businesses’ general liability or property policy(s) cover terrorist acts? What about your aircraft insurance policy?

Oddly enough, losses caused by terrorist acts can actually be covered in some cases. It’s important, though, that you pay attention to your policy and its exclusions. First, most policies exclude losses as the result of a terrorist act, as well as other acts of war or violence.   However, after the events of September 11th, 2001, Congress passed a law (and amendments) under the Terrorism Risk Insurance Act (TRIA) that gives you the right to purchase insurance coverage for certain losses resulting from acts of terrorism.

Without getting too technical, an “act of terrorism” as defined in the law refers to any act that is certified by the Secretary of the Treasury, Secretary of State, and the Attorney General of the United States. To be considered an act of terrorism, it must be a violent act, or an act that is dangerous to human life, property or infrastructure. Additionally, the damage must have taken place within the United States (with the exception of certain air carriers or vessels). The violent act must have also been committed by an individual or individuals as part of an effort to coerce the civilian population of the U.S., or to influence the policies or conduct of the U.S. Government by coercion.

Some of you may have seen or had to sign an acceptance or rejection of terrorism coverage form when you bought your businesses’ general liability policy, property policy, or your aircraft policy. Most companies charge additional premium if you elect to purchase this coverage. Unfortunately, pricing varies greatly by carrier and the type of risk being insured. If interested in this coverage, I would encourage you to ask your agent about a potential alternative we refer to as “War Risk and Allied Perils” coverage.

However, even if you purchase TRIA coverage, it’s important to note that your losses may actually be partially reimbursed by the U.S. Government under a formula outlined in the law. They will generally reimburse 85% of the covered losses that exceed established deductibles paid by the insurance companies. The law also has a $100 Billion cap on the amount the U.S. Government will reimburse as well as the insurance companies liability for all losses during any one calendar year. Additionally, your policy may have exclusions for things such as nuclear events. One distinct difference between TRIA and War Risk coverage is that TRIA cannot be cancelled, whereas War Risk can after 7 days notice.

As with any coverage, we recommend you discuss your needs and exposures with your agent to ensure it meets your requirements.

Hopefully, we won’t ever have to deal with another terrorist act in our country. However, as long as we have mass murderers, cowards, and lunatics that believe killing innocent people in the name of their “God”, we will have to keep our guard up and protect ourselves. God Bless America!

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