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What does terrorism have to do with insurance?

Whenever tragedy strikes, whether it is a natural disaster or man-made hazard, communities pull together to start the rebuilding process. Rebuilding can be spiritual and emotional as members of the effected community support each other through a difficult time, and it can also be practical, as people figure out to physically recover from an occurrence that caused destruction.

When it comes time to physically rebuilding, victims look to the state and federal government, along with insurance companies, to help provide the financial and logistical resources that they need to reopen businesses or repair homes. That process can be difficult, especially when the terms and effect of insurance policies and applicable laws can be confusing.

In the wake of the bombings at the Boston Marathon, many local businesses are finding out that they lacked the appropriate coverage for such an event. Businesses on the East Coast and in other zones affected by severe weather are often aware of special coverage for flooding, hurricanes, and other similar types of events. However, initial reports show that only about 60 percent of businesses nationally have coverage for terrorist events, and the official count is not clear yet for the businesses affected by the destruction at the marathon.

This type of coverage can be very expensive and is only applicable in cases where the government officially designates something as a terrorist event; otherwise damage is covered under standard property damage policies.

A spokesperson from a local business group told reporters that they are discussing these issues with the government and are in talks about the best way to help businesses recover financially from the damage.

Source: Wall Street Journal, "'Terror' Threatens Insurance Payouts," Leslie Scism, April 24, 2013.

Official designations of the nature of events can have a major impact on insurance claims in a variety of contexts. More information about the rights of policy holders can be found on our insurance claims denial page.

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