Is Terrorism Insurance Necessary?
It’s hard to prepare for the unthinkable. Understandably, no one wants to believe that their business, and real estate, would ever be a victim of terrorism. And yet, the world that we live in today proves that we should.
Enacted after September 11, 2001, the Terrorism Risk Insurance Act (TRIA) was created as a federal backstop for insurance claims related to acts of terrorism. After paying $32 billion, the largest insured loss in world history, U.S. insurers refused to cover terrorism unless the federal government agreed to help pay claims.
With TRIA set to expire at the end of 2014, it’s got everyone questioning: Is TRIA, and terrorism insurance, in general, necessary?
An article by USA Today insists that the Boston bombings are enough to show critical need for terrorism insurance. Businesses on Boylston Street, which was closed after the bombings, suffered a huge loss of sales following the marathon that they won’t likely recoup.
However, for businesses that had terrorism insurance, they may have qualified for business-interruption coverage under their policies after the catastrophe. Although some stores were closed for business after the marathon, others remained opened, and they may have also been eligible for reimbursements if they were able to show a considerable decrease in business after the bombings.
But, cost of terrorism insurance isn’t cheap. Incorporated into the lease expenses in the new Queens Center mall in Elmhurst, N.Y., the coverage adds nearly $1.25 a square foot to the cost. And still, as many as 70% of businesses are willing to pay that price. Clearly a majority of businesses, and real estate investors, believe it’s definitely necessary.
If Congress fails to reauthorize TRIA, chances are adequate insurance to protect against terrorism will like be unavailable. So, what’s your plan?
At Assurance, we’re experts at risk management. Speak to a representative today to prepare your real estate for the unthinkable.
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