The recent terror attacks in Mumbai have raised an issue of 'Insurance against terror attacks'. As far as Life Insurance is concerned, there is no need for a separate terror policy if one is adequately insured. The thumb rule for adequate insurance is about 6-8 times your annual income. A typical life insurance policy covers death due to any reason other than suicide in the first year of the policy. Other options to cover the risk of terror attacks are: A personal accident insurance cover or a simple term insurance plan with a 'personal accident' rider. However, recently a unique exclusive terrorism insurance policy has been introduced jointly by a Delhi based insurer 'Optima Insurance Brokers' and 'Oriental Insurance Company'. The policy offers a 5 lakh cover at the annual premium of Rs 99 only, and can be availed through the online portal 'click2insure.com'. Policies like this are directed at middle class and lower middle class people who suffer from inadequate life insurance cover.
However, non-life insurance against terror is woefully inadequate in our country. Many companies are unaware of the level of terror risk faced by them. And, even after buying terror covers for their properties and possible business disruptions, companies do not clearly know how the personal and property claims from a terror attack could impact their balance sheets. Terrorism insurance is mostly offered as a rider or add-on cover to the main policies by domestic insurers. Internationally, it is available even as a standalone policy. Individuals can protect their property and valuables by opting for a terrorism cover under the householder's policy. This can be bought at an extra premium of 0.08%.
Terror claims are settled through a 'terror insurance pool' created by the non life insurers. The maximum rate of an add on terror cover is 0.22%, which is now proposed to be raised to 0.3% on the advise of the underwriting committee. There is also a suggestion to allow policy holders to opt for mid term purchase of terror cover.
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