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Terrorism: Acts of Terrorism: When will Insurance Respond?
Insurance policies provide financial protection in a broad range of circumstances but each type of product specifies certain situations where the policy will not respond. These vary from one type of product to another, and can vary in detail between one insurer and another. It is important to check the details of your individual policy. However the questions and answers below seek to set out the usual approach for each of the main types of insurance.
If you have specific queries on your policy you should approach your insurer or broker.
Property cover
Will my home be covered if it is damaged or destroyed in a terrorist attack?
Yes. Household, buildings and contents policies include damage by fire, explosion or impact whether caused accidentally, through the malicious act of an individual criminal or in an act of terrorism. This cover will normally include the cost of alternative accommodation whilst your home is being repaired, typically up to a total of 20% of the sum insured. However contamination cover, whether caused accidentally or through malicious or terrorist activity, is excluded under household policies. In these circumstances the consequential costs such as alternative accommodation would not apply either.
Some blocks of flats are insured under commercial, rather than household, policies. Under these policies terrorism damage is covered if the specific top-up cover readily available in the market has been taken up. This can be arranged either at the date of renewal, or added to the policy mid-term. This cover will normally include chemical, biological, radiological or nuclear contamination caused by terrorist activity. You should speak to your broker or insurer to obtain a quote and information on how to buy this additional cover.
Why isn't contamination cover included on Household policies?
Contamination has been a standard exclusion on household policies since the 1960΄s as the likely aggregation of claims (many homes will be affected by a single incident) and cost of clean-up could not be met by insurers without putting their financial viability at risk. This would not protect the interests of other policyholders. The additional cover available to commercial properties is only possible through the Pool Re Scheme, backed by government.
However if the contamination is caused by a terrorist attack on premises containing nuclear material insured by the Pool Re Nuclear Scheme, the third party liabilities towards other people's property would be picked up by this specialist insurer.
Is cover available for businesses? What about consequential losses?
Yes. You can obtain terrorism cover as an add-on to your property cover and should ask your insurer for a quote, either at renewal or mid-term if you wish to review your situation. This is available on a competitively priced basis, but is associated with your property policy if obtained through the Pool Re scheme, available via most commercial property insurers. Alternatively some terrorism cover is available on a stand-alone basis through the Lloyds of London market.
Commercial property terrorism cover is normally provided on an All Risk basis and includes biological, chemical, radiological and nuclear contamination, and the consequential business interruption losses. However it does not include e-risks, nor losses due to hoaxes.
Why isn't terrorism cover a standard part of commercial property cover?
There is no statutory requirement to have this cover in place. However you should check your contractual requirements, as you may need to put in place such cover to meet your obligations under certain types of contract (for example in leases or loan agreements). You can opt into this cover if you require it by asking your property insurer for a quote and paying the additional premium.
Terrorism: Acts of Terrorism: When will Insurance Respond?
Insurance policies provide financial protection in a broad range of
circumstances but each type of product specifies certain situations where the policy will not respond. These vary from one type of product to another, and can vary in detail between one insurer and another. It is important to check the details of your individual policy. However the questions and answers below seek to set out the usual approach for each of the main types of insurance.
If you have specific queries on your policy you should approach your insurer or broker.
Property cover
Will my home be covered if it is damaged or destroyed in a terrorist attack?
Yes. Household policies include damage by fire, explosion or impact whether caused accidentally, through the malicious act of an individual criminal or in an act of terrorism. This cover will normally include the cost of alternative accommodation whilst your home is being repaired, typically up to a total of 20% of the sum insured. However contamination cover, whether caused accidentally or through malicious or terrorist activity, is excluded under household policies. In these circumstances the consequential costs such as alternative accommodation would not apply either.
Some blocks of flats are insured under commercial, rather than household, policies. Under these policies terrorism damage is covered if the specific top-up cover readily available in the market has been taken up. This can be arranged either at the date of renewal, or added to the policy mid-term. This cover will normally include chemical, biological, radiological or nuclear contamination caused by terrorist activity. You should speak to your broker or insurer to obtain a quote and information on how to buy this additional cover.
Why isn't contamination cover included on Household policies?
Contamination has been a standard exclusion on household policies since the 1960΄s as the likely aggregation of claims (many homes will be affected by a single incident) and cost of clean-up could not be met by insurers without putting their financial viability at risk. This would not protect the interests of other policyholders. The additional cover available to commercial properties is only possible through the Pool Re Scheme, backed by government.
However if the contamination is caused by a terrorist attack on premises containing nuclear material insured by the Pool Re Nuclear Scheme, the third party liabilities towards other people's property would be picked up by this specialist insurers.
Is cover available for businesses? What about consequential losses?
Yes. You can obtain terrorism cover as an add-on to your property cover and should ask your insurer for a quote, either at renewal or mid-term if you wish to review your situation. This is available on a competitively priced basis, but is associated with your property policy if obtained through the Pool Re scheme, available via most commercial property insurers. Alternatively some terrorism cover is available on a stand-alone basis through the Lloyds market.
Commercial property terrorism cover is normally provided on an All Risk basis and includes biological, chemical, radiological and nuclear contamination, and the consequential business interruption losses. However it does not include e-risks, nor losses due to hoaxes.
Why isn't terrorism cover a standard part of commercial property cover?
There is no statutory requirement to have this cover in place. However you should check your contractual requirements, as you may need to put in place such cover to meet your obligations under certain types of contract (for example in leases or loan agreements). You can opt into this cover if you require it by asking your property insurer for a quote and paying the additional premium.
About the Author
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