Terrorism Insurance – The Facts
You may have heard of terrorism insurance and wondered if it’s something you need to have for your property – particularly if you live in a block of flats. The simple answer is that it is optional, but it’s definitely something you should consider. Whenever we hear the word “terrorism”, it’s easy to detach ourselves and think that this kind of thing will never happen to us. Well, hopefully that’s the case. Hopefully we’ll never be in a situation where we’re a direct victim of terrorism. However, the increasing number of terrorist attacks over the last few years is undeniably a cause for concern. That’s why you may want to seriously think about insuring your property against acts of terrorism.
What is terrorism?
Sadly, in today’s society, I don’t think many of us need terrorism explaining. But, just to be clear, terrorism is defined by the Oxford English Dictionaries as:
The unlawful use of violence and intimidation, especially against civilians, in the pursuit of political aims.
The history of terrorism
There is some dispute about where the term “terrorism” actually comes from.
Some historians believe that terrorism dates back as far as 1793 during the French Revolution and the “reign of terror”. During this time, ruling Jacobins used violence and ordered mass executions by guillotine. Their aim was to intimidate their enemies and force the French to follow their laws.
Others believe that terrorism actually dates even further back, to the time of the Gunpowder Plot in 1605. The plot was formed by a group of Catholic men who planned to kill King James I and members of parliament and restore the Catholic faith in England.
Fast forward to today and we regularly hear about acts of terrorism around the world.
Preventing Terrorism
Sadly, terrorism is likely to always be alive. However, in the United Kingdom we have a number of agencies set up to protect us against terrorist acts.
Police
The police force in the UK have a dedicated alliance known as Counter Terrorism Policing. They work alongside security and intelligence agencies to prevent and investigate suspected terrorist activity.
Secret Services
The British Secret Services are made up of three agencies – MI5, MI6 and GCHQ.
MI5
The main role of MI5 is to protect the United Kingdom from threats to national security.
The main threats to national security that MI5 counters are terrorism, espionage, cyber threats and the proliferation of weapons of mass destruction. https://www.mi5.gov.uk/what-we-do
MI6
MI6, properly known as the Secret Intelligence Service (SIS), is the UK’s external intelligence agency – that is, it is responsible for protecting and promoting British interests and security overseas. One of the methods by which it does this is espionage. https://www.politics.co.uk/reference/mi6
GCHQ
The Government Communications Headquarters protects the United Kingdom by listening in to communications all over the world.
Terrorism Insurance
Terrorism insurance isn’t currently offered as standard for people living in blocks of flats in the United Kingdom. In the majority of policies, terrorism insurance is an optional extra.
It’s easy to read all the facts about terrorism and think that it’s something that’s just never going to impact you, and that you’re never going to need terrorism insurance. But it really is something you should consider. As a Mum I’m always on the lookout for ways to save on our outgoings. But, as a home or business owner, can you really afford not to have it? It may not actually work out as expensive as you think either. There are companies such as Deacon Insurance, who offer specialist buildings insurance – it really is worth looking into.
When you’re considering terrorism insurance, there are a few things you need to be aware of:
- It may actually be a condition of your lease that you have terrrorism insurance. This is, in fact, true for most blocks of flats, where most leases require cover in accordance with CML [Council of Mortgage Lenders] recommendations, and that includes cover for things like explosions.
- Individual mortgage providers may insist that you have terrorism insurance cover.
- In a block of flats, there is always a possibility that another resident may be a threat. It’s a sad fact that home-made bomb factories are often found in blocks of flats.
Why isn’t terrorism insurance included as standard?
You may be wondering why, if terrorism insurance is so important, it isn’t included as standard on insurance policies for commercial properties and blocks of flats. The simple answer is that insurance companies can take big hits on terrorism claims. Acts of terrorism can cause devastation and losses can be huge.
Between 2004 and 2016, the United Kingdom recorded the biggest loss from terrorism out of all the countries within the European Union. In fact, as recently as 2017, it’s believed that terrorism cost the UK economy an estimated £3billion!
Losses can be so huge that special measures have to be put into place for commercial property to insure that large value claims can be covered financially. Because of the potential for huge losses, blocks of flats are also treated as a commercial insurance risk – this means that terrorism cover is not automatically included in a standard cover and must be purchased as additional cover.
Pool Re
Most insurers who provide commercial property insurance are part of the Pool Re scheme. All members of the scheme agree to offer terrorism insurance to their clients. Insurers pay a premium to be part of the Pool Re scheme, and should they receive a claim against a client’s terrorism cover, they can use pooled funds to cover losses. In the event that the losses are so huge that the scheme can’t cover them, Pool Re can claim funds from the government to ensure that all losses are covered.
It’s important to consider what would happen if your property did become a victim of a terrorist act. How would you pay to rebuild if your property suffered a bomb attack? For the vast majority of us, we simply wouldn’t be able to cover the costs without terrorism insurance in place.
*This is a collaborative post.
Really useful info, thanks! My brother is looking into buying a flat so this will come in handy for him.