What Is Terrorism Insurance and Does Your California Business Need It?

When most business owners think about risk, they consider natural disasters, liability claims, or theft. But one risk that often goes unaddressed is terrorism. While it may seem like a rare or remote threat, terrorism-related incidents can cause massive property damage and business disruption, especially in high-density areas like Los Angeles, San Francisco, or other parts of California.

That’s where terrorism insurance comes in.

What Is Terrorism Insurance?

Terrorism insurance is a type of commercial coverage designed to protect businesses from losses caused by acts of terrorism. Most policies in the U.S. are backed by the Terrorism Risk Insurance Act (TRIA), a federal program established after 9/11 to make this type of coverage widely available and affordable.

Terrorism insurance can help pay for:

• Physical damage to your building or business property

• Business income loss due to required shutdowns or restricted access

• Cleanup, relocation, or rebuilding costs

However, in order for a terrorist act to trigger the policy, it must be certified by the U.S. Secretary of the Treasury, in conjunction with the Secretary of State and the Attorney General. This process is in place to ensure that only acts of terrorism that result in significant damage and disruption are covered under TRIA.

To be certified, the event must be deemed a violent act or threat of violence intended to coerce or intimidate civilians or influence government policy. Additionally, the total insured losses from the event must exceed a specific monetary threshold, currently set at $5 million. This threshold helps filter out smaller, isolated incidents and focuses TRIA protection on large-scale, impactful acts.

It’s important to note that if an incident is not certified, even if it appears to be an act of terrorism, your terrorism insurance coverage may not apply. This makes it critical to review your policy language carefully and understand what triggers a claim under your specific carrier’s endorsement.

Is It Included in Your Commercial Property or Liability Policy?

No. Terrorism coverage is not automatically included in most standard commercial property or liability policies. Carriers are required to offer it to you, but you have to opt in and pay an additional premium. It’s usually very affordable relative to the potential risk, especially in major metropolitan or landmark areas.

Who Should Consider It?

Terrorism insurance is especially relevant for:

• Businesses located in urban or densely populated areas

• Companies with high foot traffic or symbolic targets (e.g., malls, arenas, banks)

• Building owners with multi-tenant commercial properties

• Organizations with government contracts or sensitive data

Even if your business isn’t a likely target, collateral damage from a nearby event could impact your operations. That’s why it’s smart to assess your exposure with an experienced advisor.

The Bottom Line

Terrorism insurance may not be on your radar, but it should be part of a well-rounded commercial risk strategy, especially in California. With TRIA in place, the coverage is accessible and affordable.

Wondering if terrorism insurance makes sense for your business?

Let’s review your current policy and evaluate your exposure.

Request a custom review today!