Understanding the Terrorism Exclusion in Business Insurance Policies

By Jenny Holly Hansen | WBN News | May 14, 2025

When I work with business clients to review their insurance policies, one clause that often raises questions is the terrorism exclusion. It’s not as commonly discussed as fire coverage or liability protection, but it can have serious implications—especially for businesses located in high-profile areas or operating in industries seen as potential targets.

What Is a Terrorism Exclusion?

A terrorism exclusion is a clause in many commercial insurance policies that explicitly states the insurer will not cover losses resulting from acts of terrorism. These exclusions are designed to limit the insurer’s liability in the event of large-scale, intentional attacks that could cause catastrophic damage or loss of life.

Without this exclusion, insurers could be exposed to overwhelming financial risk. After events like 9/11, many insurers reevaluated their stance on terrorism coverage due to the scale of potential losses. As a result, exclusions became common practice in standard business policies.

What Counts as Terrorism?

The definition of terrorism for insurance purposes is often narrow and tied to formal declarations. In Canada, for example, an event might need to be officially declared an act of terrorism by a government authority or meet criteria involving political, religious, or ideological motives that target civilians or property.

This means not every violent or destructive incident will be classified as terrorism in the insurance world. For example, riots, vandalism, or workplace violence are typically not included under the terrorism label unless they meet very specific criteria.

Why Should Business Owners Care?

If your business is impacted by an event that qualifies as terrorism under this exclusion, you may find that:

• Property damage isn't covered.
• Business interruption losses are excluded.
• Employee injury claims may only be addressed under workers’ compensation, not your broader policy.

That can be a devastating surprise, especially if your operations are halted for days, weeks, or longer.

Can I Get Terrorism Coverage?

Yes, in some cases you can. A few insurers offer optional terrorism coverage through add-ons or separate policies. This may come in the form of standalone terrorism insurance or endorsements that narrow the scope of the exclusion.

It’s often worth reviewing this with your broker if your business is located in:

• Major urban centres
• High-traffic public spaces (malls, stadiums, transit hubs)
• Industries perceived as symbolic (media, finance, infrastructure)

How I Advise My Clients

Whenever I’m reviewing a policy with a business owner, I take time to explain exclusions like this one in plain language. My goal is always to ensure you understand what your policy protects—and what it doesn’t—so you can make informed decisions. If terrorism coverage makes sense for your risk profile, we explore the best way to add that protection.

Bottom line: Terrorism exclusions are standard, but they don’t have to leave your business exposed. Knowing where your risks lie and understanding your options is the first step in building a policy that truly supports your resilience.

Let’s Keep Talking:

Jenny is a business insurance broker with Waypoint Insurance. With 19 years experience, she will well versed in the technical aspects of business coverages.

She can be reached at 604-317-6755 or jholly-hansen@wbnn.news. Connect with Jenny on LinkedIn at https://www.linkedin.com/in/jenny-holly-hansen-365b691b/.  Connect with Jenny at BlueSky: https://bsky.app/profile/jennyhollyhansen.bsky.social

Let’s Meet Up:

Jenny Holly Hansen is a cohost with Chris Sturges of the Langley Impact Networking Group. You are welcome to join us on Thursday’s from 4pm to 6pm at: Sidebar Bar and Grill: 100b - 20018 83A Avenue, Langley, BC V2Y 3R4

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