A changing world prompts insurance
As the United States prepares to wage
war on Iraq and continues its war on terrorism, recurring yellow
and orange alerts from the Department of Homeland Security have
raised a red flag for some consumers about possible holes in insurance
The key question: Does my policy have
an act-of-war exclusion that could cost me or my beneficiaries?
The likely answer: No.
Dr. Harold D. Skipper Jr., chair of
the department of risk management and insurance at Georgia State
University in Atlanta, says such an exclusion is no longer standard
in life insurance coverage. "They haven't been put in life insurance
policies for decades," he says.
Typically, such exclusions "were intended
for individuals who would be voluntarily putting themselves in harm's
way," says Herb Perone, spokesman for the American
Council of Life Insurers, a trade association whose 400 member
companies write 80 percent of the business. The clauses often were
canceled when hostilities ceased.
"During the Persian Gulf War, many
companies didn't include [the exclusions] in policies written for
military personnel," Perone says.
But, notes Perone, if you have any questions
on your life insurance coverage, especially if you may be traveling
to a war zone, call your agent or contact the company directly.
Home, auto and
accidental death policies
Act-of-war exclusions are common, however, in home, auto and accidental
death and dismemberment policies.
When the formats for most of the modern-day
policies were conceived, an act of war was envisioned as an old-style
confrontation with a known aggressor, says Bob Hunter, director
of insurance for the Consumer
Federation of America, an umbrella group of 260 consumer groups
based in Washington, D.C. In such a case, the industry reasoned,
individual companies couldn't be expected to pay for the damage
that would result.
But what about a war on terrorism where
the enemy is not a country or even a party within a country?
"An act of war is a legal concept,"
says Perone. "Normally that's been held to be an act that occurs
in a conflict between two sovereign states."
There are terrorism exclusions written
into some travel policies, so check the fine print -- and the political
climate of your destination -- before you leave.
Don Griffin, the director of business
and personal lines for the National
Association of Independent Insurers, the largest property and
casualty trade group, advises consumers to check their policy and
call their agent or company if they have questions.
The act-of-war exclusion "is on
virtually every home and auto policy, and usually a definition of
[war] follows," he says.
While a war doesn't have to be officially
declared to qualify -- think Korea and Vietnam -- the insurance
industry and the courts have upheld "war" to be a conflict
Those who filed damage claims related
to the Sept. 11 attacks should not have been hindered by an act-of-war
clause. Insurance sector leaders point out there was no war on at
the time of the attack and the attack did not originate directly
from a foreign government. Perhaps most telling, insurance professionals
pitched in alongside of everyone else to get people back on their
"Insurance is the sale of a promise,"
says Kathleen Sebelius, president of the National
Association of Insurance Commissioners, an organization of state
regulators, said in a written statement. "And, as regulators, my
colleagues and I are here to make sure those promises are kept."
When the United States is engaged in a war against another country,
most experts expect that travelers to the conflict region generally
would be barred from collecting on property, accidental death or
Military personnel could face similar
exclusions. The final decision would be up to the individual insurance
companies, and could vary depending on the circumstances of the
If America wages war with another country
and there is action on U.S. soil, then property damaged as a result
probably would not be covered. Likewise, companies would not be
required to pay on accidental death or injury claims.
And the insurance industry, along with
other sectors of the U.S. economy, is still evaluating the terror
attack ramifications. "Every industry in this country is going to
have to react to the situation as it develops," Perone says.
Industry gurus don't rule out changes
to the way policies are written because of recent incidents.
"Policies obviously do not contemplate
this type of event," says Griffin. "Companies may look
at this going forward and decide they want to change the policy
For families who are doing smart financial planning, the question
of act-of-war exclusions on life and accidental death and injury
policies is almost moot.
"From a financial planning standpoint,
the individual should not be relying on accidental-death coverage
as a plan to provide for one's heirs," says Skipper.
Accidental-death policies appeal to
people because they are cheap and because many younger people don't
equate death with disease.
But the policies are cheap for a reason,
"What causes the death is immaterial,"
he says. "If you have a policy that pays off only in case of
an accident, then guess what? You don't have a very good policy."
Dana Dratch is a freelance writer
based in Atlanta.
-- Updated: March 19, 2003