The threat of terror attacks is an omnipresent one. With rising India-Pakistan tension after India’s surgical strikes on Pakistan Occupied Kashmir (POK), the possibility of loss of life and property on due to terrorism may have increased.
In such a situation, insurance plays a big role in limiting damage caused by terrorists. FeMoney spoke to Atrey Bhardwaj, AVP-Business Operations & Partner Management, BankBazaar.com, to understand the various aspects of terrorism cover. Here are the excerpts:
During recent times there has been cross-border tension and the possiblity of terror strikes has risen. What are the triggers that should prompt people in taking terror cover for life and property?
Terrorism insurance provides coverage to individuals and businesses for potential losses due to acts of terrorism. Typically, in India, this cover is highly sought by the corporates. They may be local corporates or foreign companies who have a high investment in a local country and intends to insure that risk.
General insurance as well as travel, health, and personal accident insurances protect against terrorist attacks. However, this cover is almost always in the form of add-ons that have to be purchased separately.
Ideally, all business activities, schools, colleges, hospitals, infrastructure projects such as bridges, flyovers, ports, etc., private buildings, and so on should be covered by terrorism insurance. In case you are living or running your business in a place that is sensitive, or if you travel frequently to such areas, it would be advisable to take an insurance policy that provides cover against terror attacks. This is particularly advisable in case of travel insurance, where the need for protection is higher.
What are the various covers available against loss caused by terrorism?
Standard general insurance policies, for both residential and commercial properties, provide protection against damage to property and personal possessions due to explosion, fire, or smoke, but they may not explicitly cover terrorist attacks. Similarly, many travel insurance policies do not cover loss due to terror attacks. Only losses from situations like loss of passport or baggage, trip cancellation, medical expenses, etc., are covered usually. Some may cover hijacking of planes, buses, and trains, however, others may provide it as an add-on. It all depends on the plan. Health insurances, too, protect against medical emergency due to a terrorist attack within India. However, very few extend this to outside the country. Personal accident policies provide compensation in case of death or disability of the policyholder. Almost every type of policy has riders for terrorist attacks that cover all the above mentioned situations. The point to keep in mind is that protection from terror attacks are almost always not a part of the original policy and need to be purchased separately.
What are the exclusions?
Many policies exclude biological, chemical, or nuclear attacks and complications arising from these. Similarly, standard auto insurances, too, do not provide protection against terrorist attacks, though there are additional riders available that cover such cases.
What are the criteria to decide on how much cover one should avail?
The extent of cover is based on the type of policy. In case of a general insurance, the policy should be sufficient to cover any debts associated with business or residential property, the value of the property inside it, as well as the cost of rebuilding your home or business establishment.
In case of a personal policy, it should cover any debts or liabilities the insurer may have, as well as provide for their family in their absence. As a thumb rule, a minimum level of cover equivalent to 10 times your annual salary is a safe amount. However, you might want cover nearer 15 or even 20 times your annual income if you have major outgoings such as a home loan or a large family to support. It is also good to have an additional critical illness cover in your life insurance for added security. Your health insurance, too, should provide sufficient cover for yourself keeping in mind the escalating costs of medical intervention. Ultimately, the cover is directly related to affordability. The bigger the pay-out you want, the higher your premiums will be. What is essential is that you review your policies periodically and make sure that they continue to provide sufficient protection if your circumstances change.