What do I need to know about the “war risk” rider for my BTA or AD&D plan?



George Bashaw – Atlas Global Benefits

The US State Department has already issued three travel warnings in the month of April for Georgia (gun fire and violence), Sudan (possibility of violence and harassment targeting westerners) and Central African Republic (armed rebel groups and bandits). Do you have employees working or traveling to the Middle East, Africa, or South America? If so, they may not be covered if you do not have war risk.

War Risk

War risk is a type of insurance that covers your employees due to acts of war, invasion, insurrection, rebellion and hijacking and may include weapons of mass destruction. Concerning benefits, war risk is a commonly excluded rider on Accidental Death and Dismemberment (AD&D) and Business Travel Accident (BTA) policies unless specifically requested.

What to look for:

Make a list of all the countries where your employees are traveling and make sure the insurance carrier has not excluded one of these locations. Typically, carriers classify dangerous countries “hot spots” or “hot zones” by area of severity. Notify your broker or carrier so the carrier can assess the risk and include these hot zones.

What if the countries you travel to varies depending on assignments and cannot be predicted? Disclose the known countries and request an annual audit to be performed at the end of the year.  An initial down payment is typically requested ($500 is fair).  This will give you flexibility to report known travel exposure at the end of the year. The carriers should be able to retroactively bill you for “actual” exposure.

Annual Audit vs. Fully Insured

Most carriers can offer War Risk as either a fully insured plan or an annual audit.  If you elect the fully insured plan, you will be paying a premium on an estimated exposure.  Depending on budgets, your company may prefer a ‘known’ premium for this coverage.

Annual Audit is the other alternative.  As previously mentioned, the carrier will perform an audit at the end of the year and bill for “actual” exposure.  In my experience, the amount charged back based on actual exposure will be less than the estimated amount in a fully insured offering.  In addition, the carrier rarely seems to conduct these audits annually when the policy is prepaid.

Cost and Payment Options:

BTA is one of the least expensive benefits your company can offer. Adding war risk is a great idea if you have any employees that travel outside of the US.

Typically there are three options for paying this premium: annual premium, annual installment, and three year prepaid.

Three year prepaid is the way to go. It is typically over 10% less expensive and you are less likely to get an annual audit. Plus, it is about the only benefit you will not have to renew next year. If you cancel the policy before the end of three years, most carriers will refund any “unused” premium.

If you want to pay every year, you should choose the annual installment over the annual premium since it will also be offered at a discounted rate (around 5%). The annual installment is essentially a rate guarantee for three years. No penalty if the policy is canceled prior to three years.

This is the skinny on war risk. Please let me know if you need your policy evaluated or if you have any questions.

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