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What is Terrorism Insurance?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 10 November 2016
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Terrorism insurance could be any type of insurance company guarantee that they will pay a sum of money should something be destroyed, damaged or otherwise altered due to terrorist acts. There are many different types of terrorist insurance, ranging from protection of property or product to protections if a person is kidnapped and ransomed. Even terrorism travel insurance exists.

In some countries, especially where huge terrorist actions have occurred, insurers may be loath to offer terrorism insurance. The cost of payout should a terrorist attack occur could be in the nature of millions or billions of dollars. Certain country governments have tried to alleviate the concern of insurers by agreeing to insure or help companies make payments when huge tragedies hit. This has been true in the US, which passed the 2007 Terrorism Risk Insurance Program Reauthorization Act, so that insurers would not feel as though a terrorist attack on their clients would destroy their companies.

As much as it might seem greedy or unfeeling to want this type of security, an insurance company must be invested in remaining in business. Should an attack hit that affects many of that companies clients, it could very well cause the company’s collapse. Thus having partnership with the US government allows insurers to offer terrorist insurance to virtually any entity or individual that wants it.

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In other countries, terrorism insurance is available too, including in those countries where terrorism is much more likely to occur, like Iraq. It may not be all the same types, and might depend on how each company assesses risk. In the US for instance, people might not seek life insurance that has a terrorist insurance clause because the policy doesn’t exclude death by terrorism. However in places like Iraq there is insurance specifically for that.

Of course the goal of any insurer is to make certain that insurance like terrorism insurance is spread out over a sufficiently wide group of people. This may not always be accomplished. People might not be particularly worried that their homes will come under the attack of terrorists. Businesses on the other hand, particularly if they’re in large buildings in major urban areas might be more concerned. The goal for the insurer then would be to make sure to enroll business in lots of different cities and in lots of locations so profit stays high, and most customers remain unaffected if a terrorist attack occurs.

Another angle in terrorism insurance is selling trip or travel insurance that could refund money if a trip gets canceled due to terrorism, help pay damages on property that are ruined by terrorist acts, or that may pay some sum to relatives when a person becomes a victim of terrorism. Most insurers will never need to pay claims because even when people travel to more violent areas, the chances of getting injured or harmed are still small. Those interested in this insurance should check to see if they need it, since other policies like life or medical insurance policies may already provide them with ample coverage.

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Discuss this Article

reader888
Post 2

Maybe it's just me, but you wouldn't catch me traveling someplace where I would need to purchase travel insurance to cover terrorism.

I think I'll just stay at home and enjoy my nice quiet life.

jlmk
Post 1

What a scary world we live in, that we have to have terrorism insurance coverage. I'd never even heard of terrorist insurance before reading this article, but it seems like a good idea to have it available. Especially for people who live in or have businesses in an area that would be a more likely target if terrorists were to attack.

I don't think I live in an area like that, but I'm happy that this is available for those who do.

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