Terrorism insurance provides financial protection against the specific and devastating losses caused by terrorist acts in several ways:
- Rebuilding & Repairing:
- Property Damage: The core protection is for physical structures damaged or destroyed. This covers the immense costs of:
- Repairing or replacing buildings
- Rectifying damage to equipment and machinery
- Cleaning up debris and contamination
- Maintaining Business Operations:
- Business Interruption: Helps cover the significant loss of income when a business cannot operate due to a terrorist attack.
- Extra Expenses: May cover the costs of:
- Renting temporary locations
- Expediting repairs to get things going again
- Increased security measures
- Shielding Against Liability:
- Lawsuit Protection: If your business is sued for injuries or property damage sustained by others during an attack, some policies include liability coverage.
- Legal Defense: Covers the high costs of lawyers and court expenses, even if the claims against you are unwarranted.
- Managing Catastrophic Risk:
- Government Partnership: In the US, the Terrorism Risk Insurance Act (TRIA) provides a federal backstop, minimizing the devastating impact on insurers if a large-scale event occurs.
- Shared Risk: This partnership encourages private insurers to offer the coverage, spreading the risk more widely.
Examples of When Terrorism Insurance is Key:
- A shopping mall is targeted in a bombing. Insurance helps the property owner rebuild and offers financial support to impacted stores.
- An office building in a major city is attacked. Insurance covers the extensive property damage and lost income for businesses located there.
- A major sporting event is evacuated due to a bomb threat. Event cancellation insurance (which often includes terrorism coverage) reimburses ticket sales and associated expenses.