In light of the recent terrorist acts in the country and the mounting tension surrounding an individual's safety during such acts, terrorism insurance is rapidly gaining an important place in insurance policies.
What is terrorism insurance?
Terrorism insurance is insurance purchased by property owners to cover their potential losses and liabilities that might occur due to terrorist activities.
Terrorism coverage is provided as an additional cover to all risks underwritten under fire, engineering and property damage.
Terror insurance comes as an inbuilt cover for personal accident policies, and most health and life insurance policies though some home insurance policies do offer a cover for it, some don't include it as part of the package. It may need to bought at an additional cost.
It is considered to be a difficult product for insurance companies, as the odds of terrorist attacks are very difficult to predict and the potential liability enormous. This combination of uncertainty and potentially huge losses makes the setting of premiums a difficult aspect.
Most insurance companies therefore exclude terrorism from the insurance coverage.
What is the India Market Terrorism Pool (IMTP)?
The General Insurance Company manages a pool of fund for terror insurance of Rs 1,200 crore (Rs 12 billion) as mandated by the Insurance Regulatory and Development Authority. In fact, the India Market Terrorism Pool was set up in 2002 with a sum of Rs 200 crore (Rs 2 billion) after the 9/11 attack on the World Trade Centre in New York. Whatever amount is left with the non-life insurance companies in the country both public and private sectors is deposited in the pool.
The pool actually covers companies/institutions for a liability of Rs 750 crore (Rs 7.50 billion), including material or property loss or damage. However, the pool actually covers major companies/institutions for a liability of Rs 750 crore, including material or property loss or damage. So if an individual wants such a cover, he would need to ask for it as a add-on to the existing insurance cover.
What are the salient features of a terrorism cover?
Some of the salient features of terror cover as an add-on are:
- Terrorism cover is taken as add on cover by payment of additional premium at the option of the insured.
- The sum insured opted for can include material damage & business interruption.
- The maximum aggregate loss may vary from company to company.
- The premium charged will vary based on the risk occupancy (i.e. industrial/non industrial /residential) and on the sum insured.
- Mid-term inclusion of terrorism coverage is not allowed.
- Terrorism cover has to be taken only in conjunction with property or engineering covers.
Are there standalone terrorism insurance policies?
There are hardly any at present with the exception of one player offering such a product, which according to reports met with a tremendous response as the launch of the policy was close to a terror attack.
However, it may soon be introduced in the portfolio of a number of insurance players, given the kind of repetitive incidence of terror attacks taking place in recent times once they have worked around the intricacies involved in it.
A note for new applicants
If you are planning to apply for any kind of insurance policy in the near future be it home insurance, life insurance or health insurance or travel insurance do check if you are covered against terror attacks. Make sure that you have built in rider that takes care of terror attack related losses, if it comes at an additional cost, see if it is viable for you and do opt for it, to ensure that you are protected on all possible fronts.
If it comes at a significantly higher cost, then you may need to evaluate opting for it based on the safety quoitent of the place you live, though that is hardly a deciding factor in today's circumstances. In the case of your travel insurance, it is a must that you are insured against terror.
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