Every year, commercial insurance policyholders are asked to either accept or decline terrorism insurance coverage.
Post 9/11, the insurance industry and the United States Government realized that there is a need for a unified solution to deal with losses as a result of terrorist attacks. The loss of life is always the most damaging and most tragic to deal with. As a firefighter myself, I hold a special place in my heart for all of the first responders and families that have suffered as a result of 9/11.
The insurance losses stemming from the 9/11 attack is estimated to be about $47 billion in commercial liability, commercial property, loss of business income, and group life insurance. At the time of 9/11, most commercial insurance policies did not specifically address terrorism and the insurers generally covered the risk of terrorist attack. By early 2002 most insurance companies specifically excluded the risk from their policies. Therefore the Terrorism Risk Insurance Act of 2002 was born. It is a federal program for insurance companies and the government to share in the risk of terrorism losses of insureds.
How It Works
Terrorism insurance is essentially a type of reinsurance provided by the government. Commercial insurers are required to offer the coverage to policyholders. The program only comes into effect when an act of terrorism is "certified" by the Secretary of the Treasury in consultation with the United States Attorney General, Department of Homeland Security, and other high-level officials.
A certain threshold of losses triggers the coverage. In 2017, the threshold of cumulative policyholder losses was changed to $100 million with gradual increases to $200 million by 2020. Also, losses paid by insurers are not to exceed $100 billion. If a terrorist attack results in over $100 billion in total losses, some coverage may be reduced for policyholders, and/or some of the losses will be uninsured.
Originally, the coverage was not to include "domestic" terrorism but in 2015 the definition of terrorism was changed to include "anyone acting on behalf of any foreign person or foreign interest."
Workers comp is a compulsory line of insurance for all businesses that covers employees injured or killed on the job, including those injured or killed by acts of terrorism. Coverage for terrorist acts cannot be excluded from workers compensation policies in any state and it is also the only line of insurance that does not exclude coverage for acts of war. TRIPRA's requirements to clearly and conspicuously disclose premium charges for terrorism coverage also apply to workers compensation.
Consult With Your Agent
The need for terrorism coverage may depend on many factors including geographical location, type of property or business you have, and cost of the coverage amount several other things. In many cases the coverage is very inexpensive, In other, it can be costly. Consult with your agent on the need for terrorism insurance. And make sure you understand the parameters of the program.