DEFINITION of 'War Risk Insurance'
A policy that provides financial protection against losses sustained from occurrences such as invasion, insurrection, revolution, military coup and terrorism. Auto, homeowners, renters, commercial property and life insurance policies often have act-of-war exclusions, meaning that they will not pay for losses caused by war-related events. Because war risk may be specifically excluded from a basic insurance policy, it is sometimes possible to purchase a separate war risk insurance policy.
BREAKING DOWN 'War Risk Insurance'
War risk insurance makes the most sense for entities that are particularly exposed to the possibility of sudden and violent political upheavals. For example, companies operating in politically unstable parts of the world are exposed to an elevated risk of loss from acts of war. War risk insurance can cover perils such as kidnapping and ransom, emergency evacuation, worker injury, long-term disability and loss or damage of property and cargo. Some war insurance policies also cover acts of terrorism, but others consider terrorism and war to be two separate categories of peril.