Life Insurance And Acts Of War: What's Covered?

Life insurance policies are designed to provide financial protection to the policyholder's loved ones in the event of their death. However, a common concern is whether these policies cover acts of war, given the potential for catastrophic loss of life in such situations. Most life insurance policies contain a war exclusion clause, which specifically exempts coverage for acts of war such as invasions, insurrections, and terrorism. This clause is included because insurance companies cannot accurately calculate the premiums necessary to cover the massive destruction and high number of claims that acts of war could cause, and protecting themselves from potential bankruptcy.

However, the applicability of war exclusion clauses is not absolute, and there may be situations where life insurance policies do provide coverage for acts of war. For example, some policies may not explicitly mention acts of war or serving in the military as exclusions. Additionally, certain companies or individuals operating in high-risk countries may be able to purchase separate war risk insurance policies or endorsements to their standard policies. Therefore, it is essential to carefully review the specific terms and conditions of a life insurance policy to determine whether acts of war are covered or excluded.

War exclusion clauses

The war exclusion clause typically includes any damage or loss caused by:

• War
• Civil war
• Revolution
• Rebellion
• Insurrection
• Civil strife
• Hostile acts by or against a belligerent power
• Capture
• Seizure
• Arrest
• Restraint or detainment (excluding piracy)
• Derelict mines, torpedoes, bombs, or other derelict weapons of war

The scope of war exclusion clauses has expanded over time. Initially, these clauses only applied to those who had contractually assumed liability, such as soldiers and military contractors. However, after the terrorist attacks on September 11, 2001, insurance companies added more comprehensive "war and terrorism" clauses that included civilians as well. These expanded clauses are now considered standard in the insurance industry.

It is important to note that war exclusion clauses can be vague, and there may be room for interpretation in certain cases. For example, what constitutes an "act of war" may be debated, and there may be arguments for coverage in certain situations. Additionally, war exclusion clauses do not typically apply to companies or individuals in high-risk environments, such as those located in politically unstable countries. These entities may be able to purchase separate war risk insurance policies to protect themselves from losses due to war-like acts.

War risk insurance

Some companies that operate in high-risk countries or politically unstable regions may seek to purchase war risk insurance as an endorsement or a stand-alone policy. War risk insurance can also include coverage for events such as sabotage, emergency evacuations, kidnappings, ransom, worker injuries, and terrorism.

Following the September 11, 2001 terrorist attacks, private war risk insurance policies for aircraft were temporarily cancelled and later reinstated with lower indemnities. This cancellation led to the enactment of the Terrorism Risk Insurance Act in the United States, providing support for insurance policies offered to commercial airlines.

While war risk insurance is challenging to obtain, it serves as a vital protection for businesses and individuals operating in high-risk environments, ensuring financial security in the face of unpredictable acts of war and political instability.

Terrorism risk insurance

War Exclusion Clauses

War exclusion clauses are commonly found in life insurance policies and specifically exclude coverage for acts of war, such as invasions, insurrections, and terrorism. These clauses are included because insurance companies cannot accurately compute premiums to cover the high risks associated with acts of war. Additionally, the potential financial impact of war-related claims could be catastrophic for insurance companies, potentially leading to bankruptcy. As a result, war exclusion clauses are considered necessary to protect insurers from financial ruin.

On the other hand, terrorism risk insurance is a separate type of coverage that has become increasingly important due to the rising threat of terrorist attacks. In the United States, the Terrorism Risk Insurance Act (TRIA) was enacted in 2002 following the September 11, 2001, terrorist attacks. TRIA established a federal program that provides a system of shared public and private compensation for insured losses resulting from certified acts of terrorism. This program is administered by the Secretary of the Treasury and has been reauthorized multiple times, with the current authorization extending until December 31, 2027.

TRIA requires insurers to offer terrorism coverage to commercial policyholders but does not mandate its purchase. This coverage can be obtained through private insurance companies, which are then reinsured by the government under TRIA. It is important to note that the Secretary of the Treasury must certify a terrorist attack for the coverage to apply.

While life insurance policies may not explicitly exclude terrorism as a cause of death, it is important to understand the nuances of your specific policy and any applicable war exclusion clauses. In some cases, life insurance claims related to acts of terrorism may be subject to foreign death claim processes, adding complexity to the situation.

In summary, while life insurance policies may provide some level of coverage for acts of terrorism, it is important to carefully review the specific terms and conditions of your policy, including any war exclusion clauses, to fully understand your coverage.

Military personnel and life insurance

Military personnel have several options for life insurance, including through the Department of Veterans Affairs (VA) and private insurers. Here is an overview of the different types of life insurance available to military personnel and veterans:

Servicemembers' Group Life Insurance (SGLI)

SGLI is a low-cost term life insurance program offered by the VA to eligible service members. It is underwritten by Prudential, one of the largest US life insurers, and provides coverage of up to $500,000 in $50,000 increments. SGLI offers a standard coverage rate of six cents for every $1,000 in coverage, which is automatically deducted from the member's military pay. It also includes Traumatic Injury Protection (TSGLI) for certain losses during active duty, such as blindness or amputation, for a flat rate of $1 per month.

SGLI is available to active-duty members of the Army, Navy, Air Force, Space Force, Marines, or Coast Guard; commissioned members of the National Oceanic and Atmospheric Administration (NOAA) or the US Public Health Service (USPHS); cadets or midshipmen of the US military academies; members, cadets, or midshipmen of the Reserve Officers Training Corps (ROTC); members of the Ready Reserve or National Guard; and volunteers in the Individual Ready Reserve (IRR) mobilization category.

Veterans' Group Life Insurance (VGLI)

VGLI is a group life insurance policy offered by the VA to veterans who have left the military. They have up to one year and 120 days from their discharge to apply for VGLI, which covers up to the amount of their SGLI coverage while enlisted and continues as lifetime renewable term coverage. Part-time SGLI policyholders who sustained a disability may also be eligible for VGLI if the disability disqualifies them from standard premium life insurance rates.

Service-Disabled Veterans' Life Insurance (S-DVI)

S-DVI is a life insurance program offered by the VA to veterans with a service-connected disability. To qualify, veterans must have been released from active duty without a dishonorable discharge on or after April 25, 1951; have a service-connected disability rating; be in good health, except for service-related conditions; and apply within two years of receiving their disability rating.

Veterans' Mortgage Life Insurance (VMLI)

VMLI is a mortgage protection insurance program offered by the VA to disabled veterans who are eligible for a VA Specially Adapted Housing (SAH) grant. It provides coverage of up to $200,000, determined by the amount owed on the mortgage, and decreases as the loan is paid off. To qualify, veterans must be under 70 years old, have a severe disability related to their service, and own or co-own their home.

Family Servicemembers' Group Life Insurance (FSGLI)

FSGLI is a VA program that provides term life insurance coverage for spouses and dependent children of SGLI policyholders. It offers coverage of up to $100,000 for spouses and $10,000 for dependent children up to age 18. Spousal coverage is typically based on the spouse's age and coverage amount, while child coverage is free.

In addition to these VA-backed programs, military personnel and veterans can also explore life insurance options from private insurers, such as USAA and the American Armed Forces Mutual Aid Association (AAFMAA), which offer various term, whole, and universal life insurance policies. It is important to carefully review the terms and conditions of any life insurance policy, including any war exclusion clauses, to ensure adequate coverage.

Aviation and shipping war risk insurance

War risk liability covers people and items inside the aircraft or vessel and is calculated based on the indemnity amount. This includes coverage for injuries, kidnappings, ransom, and emergency evacuations. On the other hand, war risk hull insurance covers the aircraft or vessel itself and is calculated based on its value. The premium for this type of insurance varies based on the expected stability of the countries to which the vessel or aircraft will travel.

The need for separate war risk insurance arises because standard insurance policies typically exclude war as a covered peril. After the September 11, 2001 terrorist attacks, war exclusion clauses became standard in many insurance policies, and private war risk insurance policies for aircraft were temporarily canceled. In response, the US Congress passed the Terrorism Risk Insurance Act to backstop insurance policies for commercial airlines.

Obtaining war risk insurance can be difficult, and it may be nearly impossible for property exposures. However, some businesses conducting global operations may be able to purchase war risk coverage as an endorsement or a stand-alone policy. Additionally, certain countries may require airlines to have war risk insurance before they can operate in their airspace or use their airports.

In summary, aviation and shipping war risk insurance is a specialized type of coverage designed to protect against the unique risks faced by the aviation and maritime industries in times of war or political instability.

Frequently asked questions