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What Does Terrorism Insurance Cover?

What Does Terrorism Insurance Cover

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It’s a tragic yet unavoidable fact that terrorist acts continue to occur around the world. While you as a businessperson may not personally be able to prevent violence, you are far from powerless against its results. While Terrorism Insurance is a relatively emergent field, it shares elements of other commercial insurance policies, which makes it easier to understand.

What is Terrorism Insurance?

Don’t make the mistake of underestimating the havoc a terrorist attack can wreak. In addition to loss of life, major injuries, and the psychological footprint of a scarring incident, your business could also suffer property damage, work interruptions, and other difficulties related to the attack. You run the risk of losing millions of dollars given the potentially large amount of destruction involved, so it’s well worth investigating whether Terrorism Insurance is appropriate for your business.

Historically, insurance companies were reluctant to underwrite Terrorism Insurance policies given the difficulty of predicting their occurrence and, of course, the potentially catastrophic liability involved. However, since the passage of the Terrorism Risk Insurance Act (TRIA) in 2002, all property and casualty insurers have been federally required to offer Terrorism Insurance. A policyholder may waive this coverage, in which case exclusions for terrorism may be written into the policy.


The TRIA made it more feasible for insurers to offer Terrorism Insurance by creating reinsurance coverage to insurers following a certified act of terrorism, essentially leveraging the government to shoulder the costs of casualty insurance and commercial property loss due to an attack.

Under this legislation, the insurer is responsible for the whole amount of a smaller loss but is assisted in the case of a medium or larger loss. For medium losses, the assistance is temporary and must be reimbursed; however, for larger losses, the assistance is more widespread without expectations that the money will be returned. However, there are no dollar amounts attached to the small, medium, and large classifications, further muddying the nascent industry.

What qualifies as a certified act of terrorism?

Under the TRIA, an event that is eligible for coverage and certified as an act of terrorism by the Secretary of the Treasury must:

If these standards do not apply to an attack, the federal government is not required to provide reinsurance coverage to insurers, and in turn, insurers are not required to cover their policyholders.


What does Terrorism Insurance cover?

In general, Terrorism Insurance covers primarily property and general liability, typically only in cases where the terrorist act is a certified act of terrorism under the TRIA.


Outside of property and general liability, Terrorism Insurance may also cover losses associated with the interruption of your business or reputational damage. Because Terrorism Insurance is highly dependent upon the insurer, coverage widely varies.

It’s important to note that for certain types of insurance, including workers’ compensation, acts of terrorism may not be excluded, meaning an on-the-job injury as a result of a terrorism attack will always be covered.

For small businesses, most insurers will offer Terrorism Insurance as additional endorsements to liability and property policies, limiting coverage to acts certified by the TRIA. Larger firms may consider standalone Terrorism Insurance policies, which often include broader coverage, including both certified and non-certified acts of terror.

What are the key exclusions of Terrorism Insurance?

Depending on your state regulations and the specific policy, Terrorism Insurance may exclude coverage for:

It is best to consult your specific policy or your insurer to determine if certain exclusions are prohibitive for the protection your business needs.

How can I better protect my business from terrorist attacks?

In addition to purchasing the right Terrorism Insurance policy, a good way to reduce your risk is to understand your business’s most vulnerable areas and create a terrorism management plan. This entails the following:

General Assessment. Your first step in the process is an overall survey of your property in order to determine your weakest spots. As you do this, keep structural vulnerability paramount in your mind—not just of your facilities, but the threats presented by the buildings surrounding you given the most common terrorist attacks such as bombings have a widespread effect. Your assessment should include the standoff distance around your entire facility—this is a key measurement of how effective your property, employees, and security plans are in foiling a person or vehicle from getting in.

Risk Assessment. Using the information gleaned from your overall assessment, you can now continue to narrow in on the potential damage a terrorist attack can inflict on your premises and how you can mitigate it. Make sure to include:

Risk Management. Using information gathered during the above assessments, you should be able to have a clearer sense of your exposures in the case of an attack. Now you can begin to incorporate basic protections such as security systems and reinforced window films. Think of this as akin to shoring up against a natural disaster.


What are the most common types of terrorist attacks?

One of the most challenging elements of terrorism is that it has a seemingly random nature. You never truly know when an attack may be afoot, and these events do not typically target a single individual or business property.

According to the U.S. Department of State, these are the most frequent types of terrorist attacks:

Comprising 54 percent of attacks, bombings and explosions are by far the most common types of attacks. According to the Department of Homeland Security’s “Securing Soft Targets and Crowded Places Resources” publication, areas that many people can access with limited security available comprise some of the most vulnerable locations. These include:

The DHS has placed special focus on renewing protection for these targets, but you should take particular care to secure coverage if you work in or around them.


According to the Insurance Information Institute, approximately 60 percent of U.S. businesses carry Terrorism Insurance. Terrorism Insurance typically covers equipment, furnishings, inventory, and buildings damaged or destroyed by terrorist acts and protects businesses against liability claims.

When evaluating the value of Terrorism Insurance to your business, make sure to consider the following:

Unfortunately, in addition to the loss of human life and injuries associated with terrorist attacks, there are also major economic repercussions stemming from terrorist attacks. If you believe that these costs may impact your business in a significant way, you should talk to your insurance broker about adding Terrorism Insurance to your policy.

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