The questions of whether or not a life insurance policy covers acts of terrorism is unfortunately a necessarily one these days. The 21st century has seen more blatant terrorism than at any other time in the past and for some Americans (as well as people around the world) death as a result of a terrorist attack is a possibility that they have to consider.
So Does It Cover Acts of Terrorism?
In general, the answer is yes a life insurance company would be required to pay for a death caused by or related to terrorism. To answer the question fully, it requires understanding how life insurance works and what factors will both require an insurance company to pay and which ones preclude them from doing so. This article will explain how you can prepare for eventualities like this when it comes to life insurance.
Understanding the Differences between Types of Insurance
The first thing that you need to understand is that life insurance actually isn’t part of the equation here. Conventional life insurance such as term life, universal life insurance or whole life insurance will pay the benefit when the person named in the policy dies – no matter what the cause of death is. Except in the case of suicide, conventional life insurance will pay whether the death is a result of an illness, an accident, or a terrorist attack. But accidental death and dismemberment insurance is probably the type of insurance that you are asking about and as to whether or not this type of insurance covers terrorist attacks the answers are little complex.
Before we get to that, you might also be interested to know that most home insurance policies are going to partially protect you in the event of a terrorist attack. The way that this works is simply that the policy does not specifically preclude terrorism, but it would mean that the terrorist attack would have to be on your home while you are inside of it – the same benefit that your beneficiary would get if your home burned down because of a gas leak. The same goes for your car insurance but again, you have to be in your car and die as a result of the terrorist attack for your beneficiary to receive that payment. There are some exceptions to this, with certain types of attacks being classified as war-risk exclusions. This only applies in states where there is no are restricted.
How the World Trade Center Bombing Changed Things
Things became a little different after the World Trade Center bombings, with insurance companies changing their policies so that the insurance will not pay out in the event of a terrorist attack. This was only with commercial insurance and had the result of making businesses unable to get the insurance coverage that they needed in the event of terrorism. But the government came to the rescue, passing the Terrorism Risk Insurance Act. Basically, this said that the government would help to pay the benefits of a commercial insurance policy invoked because of terrorism. Unfortunately, that program ended in 2014.
Standard Life Insurance Policies
If you’re concerned about an act of terrorism, and you want to have an absolute guarantee that your family is going to have a death benefit if you should die as a result of terrorist attack, then your best bet is to go with one of the standard life insurance policies that are out there, which will pay the death benefit to the beneficiaries no matter what the cause of death is. Choosing one of these policies requires that you understand what the different types of insurance are and the factors that you need to weigh before choosing one.
Term Life
Term life insurance is a type of insurance that will pay if you die within a specified period of time. For example, many people take out a 20 year term life insurance policy which they can then renew at the end of the 20 year period. It is important to note however that if a person runs out of their 20 year term life insurance policy they’re going to be much older and their premiums are probably going to be much higher because of that fact. Insurance companies make their money betting that you aren’t going to die in the more chance of that happening the bigger they make your premiums.
Whole Life
There are also some life insurance types that are intended for your entire life. First, let’s discuss whole life insurance. This type of life insurance is guaranteed to pay out the benefit upon death. There is no term; it last for your entire lifetime. This type of life insurance has a guaranteed cash value and your premium is going to be the same throughout your entire lifetime – it is a fixed amount. If you like stability and a guarantee to cover acts of terrorism, this is your insurance.
Universal Life
Another type of life insurance is called universal life insurance. There are two types – there is guaranteed universal life and indexed universal life. Basically, these are the same insurance types except for some financial differences. In this case, the interest rate on your cash value will be set by the insurance company while with an index universal life policy your interest rate will be set according to the index percentage change.
If you are worried about terrorism, then this is definitely the type of life insurance that you should look at. These life insurance policies give you peace of mind throughout the term that they are active. You know that if something happens to you your family is going to receive a benefit and that can be a comforting thing.
But ultimately, you have to decide which type you want to go with in the best way to do that is to talk with an insurance advisor that you trust to give you accurate information on each type of policy and help you decide which one is best for you. There may be nothing you can do about the threat of terrorism that has been hanging over our heads since the World Trade Center bombing, but at least you can make sure your family is protected.
