Terrorism Insurance for Condo Associations

As a property manager, you may feel lost or confused when it comes to insuring your properties. Things that you would never think about come up when you sit face to face with an insurance agent for the first time.

Terrorism insurance covers potential losses and liabilities that might occur due to terrorist activities. After 9/11, insurance companies were attempting to deny claims at the World Trade Center because they were defining it as an “act of war”. The federal government stepped in, and created the Patriot Act, which defined that a terrorist attack was different from an act of war. It also required insureds to purchase terrorism insurance separately at a price reflective of the current risk levels. Associations can opt out of coverage, but they must sign paperwork to do so.

According to research conducted by the Insurance Information Institute, premiums range anywhere from $19 to $49 per million of insured value. This is very reasonable considering the scope of damages a terrorist attack can cause. The Marathon bombings caused $333,000,000 in damages to infrastructure, retail sales, and lost wages.

When Does Terrorism Coverage Kick In?

Under the Terrorism Risk Insurance Act (TRIA), the incident in question must be declared and certified as a terrorist attack by the U.S. Secretary of the Treasury before losses will be paid out. If the losses are equal to or exceed $100 million, the association has the right to file for a reimbursement under the general policy.

If terrorism insurance is not purchased and a claim is certified as a terrorist attack, no losses will be covered. Remember, associations are only responsible for insuring the common areas of a condo complex used by all tenants. The condo unit itself is the responsibility of the unit owner which means you are not responsible for damage to personal possessions.

Exclusions and Limitations to Terrorism Insurance

The U.S. Secretary can decline to certify an event as a terrorist attack if it has biological, nuclear, radiological, or chemical causes. For example, property damage caused by radiation released by a dirty bomb would not be insurable under TRIA standards.

For certified events, losses are capped at $100 billion and the financial payout will be shared by both the federal government and the insurance agency. There is a 20% deductible for all claims.

The Aftermath of a Terrorist Attack

The weeks following a disastrous terrorist attack can be an emotional and confusing time for all. The certification process is by no means a quick one. The time it takes the federal government to collect and analyze the facts from a singular event can take months or years!

In the interim, you need to have appropriate coverage in place that financially protect you while you attempt to get business operations back up and running.

Need to reassess your current policy? Contact Brian Kilcoyne at 617-612-6515 or email him directly at briankilcoyne@hkinsurance.com.