Terrorism Insurance - Are Terrorist Attacks Covered Under Homeowners Insurance?

Personal Homeowners and Renters policies typically include coverage for damage due to limited acts of terrorism. Most polices do not specifically reference terrorism, however, they do typically cover homeowners and renters to damage caused by fire, explosion and smoke. Since most terrorist attacks are limited in scope and involve explosives; you would likely be covered in the case of a conventional bomb blast damaging your property.

Auto insurance also covers your car if it is damaged or destroyed due to limited terrorist attack under comprehensive coverage. All car owners who leased or financed their car are required to have this coverage. If you only have liability coverage and/or collision coverage, then you would not be covered in the event of a terrorist attack.

Commercial and business insurance policies typically offer coverage for loss due to terrorist attacks on a limited basis. The federal government set up a backstopped funding source with the passage of the Terrorism Risk and Insurance Act of 2002 (TRIA) following the September 11th attacks. The TRIA set up the federal government as the re-insurer for acts of terrorism that were considered as a "certified act" by the secretary of the treasury. This makes it possible to cover commercial projects and businesses that may be at higher risk of terrorist attack.

What is a limited act of terrorism?

Insurance coverage is obviously limited by the scope of an attack. All insurance policies have what's called a war exclusion clause that essentially states that acts of war are not covered under any circumstances. Although terrorism is not typically mentioned in most policies, certain acts could be considered an act of war and not be covered.

These types of attacks include nuclear, biological, chemical and radiological (NBCR). It is likely that you would be covered if the attack is limited to a bomb or other type of non-NBCR attack. However, an NBCR type of attack is fundamentally uninsurable. An act of war does not have to be declared in order for the war exclusion to apply. An attack on a nuclear facility would likely be considered an NBCR type of attack.

For commercial policies, a nuclear, biological, chemical and radiological (NBCR) attack is considered a catastrophic event that is uninsurable due to the large nature of the financial risk. Under the Terrorism Risk Insurance Act, if some NBCR exclusions are permitted by a state, an insurer does not have to make available the excluded coverage.

How can I save on homeowners insurance?

If you would like to see if you can save some money compared to your current homeowners insurance or if you are buying your first home, then we suggest that you compare policies and rates from as many insurance companies as you can prior to buying a policy. We recommend Insureme who allows you to compare several home insurance policies from major highly rated insurers. They are also unique in that they include quotes from dozens of local insurance agents in your area.

III.org - Understanding Terrorism Insurance

This should not be considered financial advice which can only be given by a qualified financial professional. We suggest you consult with a qualified financial planner and/or insurance professional who is most qualified to consult with you regarding policy decisions. Many factors are involved in your policy premium some of which may not be mentioned in this article. We are an affiliate of the Bankrate Insurance Network.

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