What is Terrorism Coverage?

Terrorism Coverage is specialized insurance that provides protection for property damage and business interruption losses resulting from certified acts of terrorism. Following the September 11, 2001 attacks, most commercial insurance policies began excluding terrorism, but the Terrorism Risk Insurance Act (TRIA) created a federal backstop program that allows insurers to offer terrorism coverage with government support. Under most commercial property policies, terrorism coverage is now offered (you must actively reject it if you don’t want it) for an additional premium, typically a small percentage of your base property premium. Terrorism coverage protects your restaurant if it’s damaged in a terrorist attack, whether your property is the direct target or suffers collateral damage from a nearby attack. The coverage typically requires the act to be “certified” as terrorism by federal authorities.

What you need to know

Following the 9/11 attacks, terrorism became a standard exclusion in commercial insurance policies until the federal government created TRIA to provide a backstop for insurers. This program allows insurance companies to offer terrorism coverage with the knowledge that the federal government will help cover catastrophic losses.

How terrorism coverage works:

Coverage is typically offered by default on commercial property policies—you must actively reject it if you don’t want it
Premium is usually just a small percentage of your base property premium (often a few hundred dollars annually)
Protects against both direct damage to your property and collateral damage from nearby attacks
Covers business interruption losses resulting from terrorism incidents
Requires the attack to be “certified” as terrorism by federal authorities (U.S. Secretary of the Treasury in concurrence with the Secretary of State and Attorney General)

What’s covered:

Property damage from terrorist attacks
Business interruption during closure and recovery
Loss of income due to restricted access to your area
Additional expenses to continue operations
Damage from collateral effects of nearby attacks

Why it matters for restaurant owners

While terrorism may seem like a remote risk for most restaurants, the 9/11 attacks demonstrated that even establishments far from the direct target can suffer devastating property damage and business interruption. Restaurants in major cities, near high-profile landmarks, in transportation hubs (airports, train stations), near government buildings or military installations, or in areas that attract large crowds may face elevated terrorism risk.

The cost-benefit equation:

The annual premium for terrorism coverage is typically modest—often just a few hundred dollars for coverage worth hundreds of thousands—making it cost-effective protection against a potentially catastrophic but low-probability event. For most restaurant owners, this represents excellent value given the severity of potential losses.

Higher-risk locations include:

Major metropolitan areas (New York, Washington D.C., Los Angeles, Chicago)
Near high-profile landmarks or tourist attractions
Transportation hubs (airports, train stations, bus terminals)
Near government buildings or military installations
Areas that regularly attract large crowds or events
Financial districts and business centers

The business interruption factor:

Beyond direct property damage, terrorism incidents can cause extended business interruption. After 9/11, many restaurants in lower Manhattan were closed for months due to restricted access to the area, loss of power and utilities, and loss of customer traffic. Without terrorism coverage, your standard business interruption insurance might not cover these losses if the damage or closure was caused by terrorism.

Making your coverage decision:

For most restaurant owners, the decision to purchase terrorism coverage is straightforward—the premium is small relative to the protection provided, and the coverage is backed by the federal government through TRIA. However, restaurants in very high-risk locations may face much higher premiums and should carefully weigh the cost versus benefit.

Critical action steps:

Review your commercial property policy to see whether terrorism coverage is included or excluded
Understand the premium cost—it’s typically disclosed separately on your policy declarations
Make an informed decision about whether to accept or reject the coverage based on your location and risk tolerance
If you’re in a high-risk location, verify your terrorism coverage limits are adequate for your property value and potential business interruption
Consider that rejecting terrorism coverage to save a few hundred dollars could leave you exposed to hundreds of thousands in uninsured losses

Remember that terrorism coverage is typically bundled with your property policy and provides both property damage and business interruption protection—you don’t need separate policies for each coverage type.