Terrorism insurance

What does terrorism insurance cover?

Terrorism insurance (also known as ‘sabotage and terrorism insurance’) comes to your aid if an act of terror or sabotage wreaks havoc on your workplace.

It’s distinct from most commercial property and business interruption insurance policies, which tend to exclude political, religious, or ideologically motivated attacks.

There are two separate parts to terrorism insurance coverage: physical damage (building and contents) and business interruption.

Physical damage pays to repair or rebuild your building if it’s damaged or destroyed following an attack. It covers everything from demolition to rubble clearance.

Business interruption compensates you for your lost income if you’re unable or find it difficult to trade in the meantime. It also pays for any extra costs you may incur – including moving into temporary premises or renting equipment.

Who needs terrorism insurance?

Terrorists don’t discriminate. Their aim is to hurt, intimidate and endanger as many people as they can. And they’ll go to any lengths to do it.

In the end, it doesn’t matter what your business does. You’re just as vulnerable to an attack as anyone else.

Location does matter, however, including your proximity to high-risk targets. So, if you’re based inside a busy shopping centre or near government buildings, you should consider yourself as being especially at risk.

Not only that, the damage to infrastructure and the road outside your building alone can be enough to put a temporary stop to business.

Either way, it’s better to arm your business with terrorism insurance, than to go without and leave yourself exposed.

Doesn’t my building insurance policy cover terrorism?

Commercial property insurance pays to repair or rebuild your work building if it’s affected by fire, flood, or another unexpected event. It doesn’t typically cover the losses, costs, damages, and expenses caused by terrorism or sabotage.

It goes without saying that the total amount you could lose in a terrorist attack, in both buildings and contents, could be large… millions of pounds large.

So, it’s important, when buying your terrorism insurance coverage, to make sure you’re not underinsured. This means choosing a policy that factors in your rebuild costs (not just your property’s market value) as well as the cost of replacing everything you actually need to do business.

What does terrorism insurance cost?

Your annual premium is worked out on three things: your location, your property and contents value, and your business income.

While insurers don’t expect you to have all this info at your fingertips, you should think about them carefully. Gather quotes, check your books, do some calculations… construction costs alone can run into the millions so you don’t want to leave yourself short of cover.

Among the questions you should ask yourself, then, is how much it could cost to repair any damage to your property – or even demolish the whole building and start again.

Next, you should think about your contents and how much you would need to replace them – from your tiniest piece of stationery to your highest-value stock item.

And don’t forget to factor in the impact on your revenue if your business were forced to shut down or relocate. So, the amount of gross profit you could lose for every month you couldn’t trade as normal.