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Terrorism Insurance for Business! Coverage, or not?

Have you heard about terrorism insurance?

There has been a lot of chatter about terrorism coverage since the Boston Marathon disaster.  Upwards of 400 businesses employing over 7,000 people in the area of the blast were affected with an economic impact upwards of 300 million dollars.  Will your business insurance pay for these claims?  That is a good question.  My quick answer is to contact your insurance agent/company.  Do not assume that you don’t have coverage, always call.

The 2002 law was enacted after the 9-11 attacks of the Twin towers in New York City.  This law tells when insurance will and will not cover losses for acts of terrorism.  Under the Terrorism Risk Insurance Act of 2002, effective November 26, 2002 (the “Act”), you have a right to purchase insurance coverage for losses arising out of acts of terrorism, as defined in Section 102(1) of the Act:

The Term Certified Act of terrorism means any act that is certified by the Secretary of the Treasury, in concurrence with the Secretary of State, and the Attorney General of the United States – to be an act of terrorism; to be a violent act or an act that is dangerous to human life, property or infrastructure; to have resulted in damage within the United States, or outside the United States in the case of an air carrier or vessel or the premises of a United States mission; to have been committed by an individual or individuals acting on behalf of any foreign person or foreign interest, as part of an effort to coerce the civilian population of the united States or to influence the policy or affect the conduct of the United States Government by coercion; and that causes losses of at least $5,000,000.

So, lets break all that down.   All of the following must be met in order for the terrorism act of 2002 exclusion.

  • Treasury Secretary declares certified act of  terrorism
  • Must be intent to “coerce civilian population” or influence U.S. policy
  • Losses must total at least $5,000,000

Some businesses may not collect insurance if all three of the above are met and they have not elected to purchase terrorism coverage.

How does my business get Terrorism coverage?

Most commercial insurance policies offer Terrorism coverage for an additional premium while some insurance companies include Terrorism coverage in their policies without additional cost.  Typically terrorism coverage costs between 2% – 4% of the insurance policy premium.  Most commercial policies provide a policyholder disclosure notice offering certified terrorism insurance coverage.  You have a choice to elect to purchase coverage or reject coverage for certified acts of terrorism coverage.

Should you elect to purchase certified terrorism coverage, you should know that coverage for losses caused by certified acts of terrorism is partially reimbursed by the United States under a formula established by federal law.  Under this formula, the United States pays 90% of covered terrorism losses exceeding the statutorily established deductible paid by the insurance company for providing the coverage.

I suppose no one is immune from certified acts of terrorism.  It may be a good idea to take another look at your commercial insurance policy and consider purchasing Terrorism coverage.

It is sad to think that we have to even think about discussing this topic!


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