Take cover: Check details, seek written confirmation of terrorism insurance

Terrorism coverage under term, health, and home policies varies across insurers and products, may require rider, and could come with loadings for high-risk occupations and regions

The recent blast near the Red Fort in Delhi has highlighted the need for insurance buyers to understand whether their term, health, and home insurance policies cover terrorism risk. Buyers should not take coverage for granted and instead verify policy wording.

 

Term insurance

 

Most term policies cover death due to terrorism. “Exclusions apply only in exceptional cases, such as death occurring due to active participation in war, rebellion, extremist activity, or illegal acts — not for innocent civilians caught in an attack,” says Bhavna Verma, chief and appointed actuary, IndiaFirst Life Insurance.

 

Pradeep Funde, senior vice-president, Anand Rathi Insurance Broking, informs that some older plans excluded terrorism. Most term policies cover it in the base policy (no rider required). The policy must be active (with premiums paid) at the time of the incident.

 

During purchase, the buyer must disclose if they are in a high-risk job. “Certain high-risk professions or postings — combat roles, hazardous occupations — require declaration so risk can be assessed properly,” says Shilpa Arora, cofounder and chief operating officer, Insurance Samadhan. Lack of disclosure could lead to problems at claim time. Verma informs that these in high-risk professions, such as military personnel, security contractors, divers, pilots, miners and oil-rig workers may be excluded or charged extra.

 

Coverage may be rejected or premiums increased for those working in high-risk areas. Those travelling to war zones, conflict areas, or sanctioned regions may also face higher premiums.

 

Understand the policy wording. “Broad exclusions like war or invasion may or may not include terrorism,” says Funde.

 

If a policy excludes war or invasion but is unclear about terrorism, verify before purchasing. “Check definitions and general exclusions to see if terrorism is treated separately,” says Verma. Seek written

 

confirmation from the insurer. If ambiguity persists, Verma advises going for a policy where terrorism coverage is clearly stated.

 

Funde urges buyers to review their policies after major life changes or relocations. Arora informs that group term insurance may exclude terrorism coverage, depending on the master policy agreement.

 

Health insurance

 

Hospitalisation expenses resulting from terror attacks may be covered on an indemnity basis, subject to policy terms and conditions outlined in policy documents. Coverage differs across insurers and products. “Review the policy for exclusions related to specific incidents or locations,” says Alok Agarwal, managing director and chief executive officer, Zurich Kotak General Insurance. Even those living in or travelling to high-risk zones must check clauses related to territorial limits and professional hazards.

 

Understand the definitions of the terms used in the exclusion list. “Reviewing terms such as war, invasion, acts of foreign enemies or hostilities, which often appear in industry exclusion lists, can help avoid surprises at the time of claim,” says Agarwal.

 

“Individuals working in high-risk zones should ask the insurer whether their specific location is on their exclusion list, whether the policy covers terrorism where they could be an innocent bystander, and confirm whether their occupation triggers exclusion,” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment advisor and founder, SahajMoney.com. Obtain written confirmation from the insurer stating that coverage applies to their specific location and profession.

 

“When reviewing policy documents, search for any mention of terrorism, war, invasion, civil commotion, riots or hostile acts and check whether terrorism is listed under exclusions,” says Kumar.

 

Never assume terrorism is covered just because there is no specific terrorism exclusion clause. “Ask the insurer for clarity on terrorism cover under their policy and request written confirmation of inclusion or  exclusion,” says Kumar.

 

Look for geographic restrictions that specifically name high-risk countries or conflict zones. Finally, identify professional or occupational exclusions that might apply to you.

 

Home insurance

 

Most retail home insurance policies do not automatically include terrorism cover unless the insured opts for a terrorism add-on. Some comprehensive packages may provide terrorism cover. Wording varies across insurers.

 

“For retail customers, terrorism is usually provided through a rider to home insurance. Premiums are modest,” says Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).

 

Coverage does not apply to general unrest. Damage must be caused directly by the terror event. Sub-limits or deductibles may apply. “Losses due to contamination, biological, chemical, or nuclear attacks are typically excluded unless explicitly covered,” says Bharindwal.

 

Insurers may exclude high-risk zones like border districts, Naxal-affected areas, and high-conflict regions. Certain professional categories, such as defence establishments or hazardous industries, may require underwriting approval. 

 

Buyers should seek written confirmation if the wording regarding terrorism appears ambiguous. “If a policy merely lists war or invasion as exclusions 

 

without mentioning terrorism, it is safer to assume that terrorism is not covered unless explicitly stated,” says Bharindwal. 

 

Finally, do buy terrorism cover as the cost of adding it is small: ~0.07 per thousand sum insured for dwellings.

 

The writer is a Mumbai-based independent journalist