Why Acts Of Terrorism Are A Small Risk For The Life Insurance Industry
Acts of terrorism seem to be a daily event these days. These attacks have caused the insurance industry to suffer massive losses due to property damage. But, how has this affected life insurance? For the most part, the impact on life insurance has been minimal. Not because people haven’t lost their lives in terrorist attacks, but because the risk of dying from an act of terrorism are very slim.
As seen in this instagram, heart and cardiovascular disorders are by far the greatest threats to life. This is closely followed by cancer and respiratory disorders. War and terrorism are the least likely causes of death, therefore a small risk to life insurance companies.
Insurance Coverage and Terrorism
In most cases, a standard home insurance policy doesn’t have any exclusions for loss or damage caused by a terrorist attack. For example, if your house burns down due to careless smoking or an explosion from a terrorist attack, it still burned down, so you’re covered.
The same holds true for your car insurance – your comprehensive coverage will pay for damages no matter how they occurred.
Damages related to certain acts of terrorism – like a chemical or biological attack – may fall under the category of war-risk exclusions. The war exclusion clause, which is under the category of policy exclusions, ensures that the insurance company isn’t obligated to pay for losses created by acts of war. It was originally intended to deny civilian claims for countries affected by war instead of to exclude soldiers.
One of the most important things to understand when looking at your policy is knowing in which cases you are protected. Your life insurance contract may contain something called a “policy exclusion,” which describes the conditions under which you are not covered.
Life Insurance and Terrorism
Unfortunately, the question of whether a life insurance policy will cover a death due to terrorism is necessary these days. There have been more blatant attacks in the 21st century than ever before. Even though the chance of being a victim of an attack are very slim, it is still a possibility we must consider.
Generally speaking, your life insurance company is required to pay for a death caused by or related to terrorism. However, policies vary from one case to another. To fully answer the question, you need to understand how life insurance works and what factors require an insurance company to pay and which ones don’t.
Different Types of Insurance
Conventional life insurance policies such as Term, Universal or Whole Life are not part of the equation. The benefit will usually be paid no matter how the insured dies – except maybe in the case of suicide or other policy exclusions. Accidental Death and Dismemberment insurance is a different story. Here things get more complicated. Ask your insurance agent or advisor whether or not you are covered and read the policy very carefully.
Standard Life Insurance Policies
If you’re concerned about being the victim of an act of terrorism, and you want to be absolutely certain that your beneficiaries will receive the insurance money should you die as a result of a terrorist attack, then a standard life insurance policy may be your best bet. This type of policy will usually pay the death benefit no matter what the cause. Make sure you understand the different types of insurance policies and weigh all the factors before you decide which one is right for you.
Term Life Insurance
Term life insurance covers you for a set period of time. You choose the length of the policy. Most often people will choose a 20 year term life insurance policy. At the end of the policy, you have the option to renew, however your circumstances will probably be much different by then and you will have different needs, so a different type may fit better into your financial goals.
Also, keep in mind that you will be much older and your health may not as good as it was when you bought your original policy. This means considerably higher premiums because your risk of dying have greatly increased.
Whole Life Insurance
Whole life insurance policies are guaranteed to pay out the benefit upon death and you keep your policy for as long as live, plus your premiums never go up. This type also has a guaranteed cash value. If you want stable coverage and a guarantee that you are covered in case of terrorism, then this is the perfect policy for you.
Universal Life Insurance
Another excellent choice with guaranteed coverage under any circumstances is universal life insurance. You can choose guaranteed universal life or indexed universal life. Both are basically the same except for some financial differences. With guaranteed universal, the interest rate on the cash value portion will be set by the insurance company, whereas with an indexed universal life policy, the interest rate is set according to the index percentage rate.
Whichever type you choose, you are guaranteed peace of mind. There may be nothing you can do about the threat of terrorism that has been hanging over our heads, but should tragedy strike at least you can make sure your family will be financially protected.