War risks and insurance cover: What should policyholders know during such crises?

The recent escalation in tensions between India and Pakistan has led to a surge in enquiries about war-related insurance coverage. This comes in the wake of the Pahalgam terror attack in Jammu and Kashmir on April 22, which resulted in the loss of 26 lives. With the recent ceasefire agreement between India and Pakistan, individuals and businesses are now contemplating the adequacy of their insurance coverage to safeguard their lives, properties, and commercial interests against potential conflict-related damages. 

However, many policyholders are still not aware of what all is covered during such crises. 

In India, standard life and term insurance policies generally do not list death due to war or war-like operations as a general exclusion. The only universal exclusion is death by suicide within the first year of the policy. 

Despite this, insurers have internal risk management protocols that classify specific areas as high-risk due to conflict. If a policyholder resides in or travels to these areas, claims might be denied based on internal underwriting conditions, even if not explicitly stated in the policy wording. This has led to confusion among insured individuals regarding their coverage in the face of geopolitical threats.

Here are a few queries Business Today got and we got expert's advice on it:
 
> If a missile hits your car during a war or geopolitical conflict, does your cover include the damage costs

Motor insurance policies in India specifically do not cover damages resulting from war-related incidents. Comprehensive policies clearly outline exclusions for war, invasion, acts of foreign enemies, and military operations under the 'war and nuclear risk' clause. Therefore, if a car is hit by a missile during wartime, insurance companies are not responsible for covering repairs or total loss, as such events are deemed uninsurable based on traditional risk assessment models.

"If a missile hits your car during war, standard motor insurance won’t cover the damage, as war-related events are explicitly excluded in most auto policies," said Manju Dhake, Senior Vice President, Insurance Advisory at 1 Finance.

"Standard motor insurance policies in India—both third-party and comprehensive—exclude damages resulting from war, invasion, acts of foreign enemies, hostilities, civil war, or military operations. This exclusion is clearly stated in the policy wording under what is commonly referred to as the 'war and nuclear risk' clause. So, if a missile or bomb were to strike your car during wartime, the insurer would not be liable to pay for repairs or total loss. The reason behind this exclusion is that war-related events are considered catastrophic and unpredictable, making them uninsurable under traditional risk models. There are no mainstream personal motor insurance products in India that offer protection against such scenarios. War risk insurance does exist, but it is typically reserved for commercial fleets, defense vehicles, or entities operating in high-conflict zones, and is rarely available or practical for individual car owners. Vehicle owners should be aware that even a comprehensive policy does not shield them from losses caused by armed conflict or missile strikes. Understanding this limitation is essential to managing expectations around claim settlements during national emergencies or war-like conditions."

> If a missile hits your house, does your cover include the damage costs

Home insurance policies typically do not cover damage caused by war, invasions, or missile strikes. Such risks fall under standard 'war exclusion' clauses."

Home insurance policies in India typically do not cover damage caused by war, invasions, or missile strikes, falling under standard 'war exclusion' clauses. These policies generally cover risks like fire, natural calamities, and theft but exclude war-related damages.

"Home insurance policies in India generally cover a wide range of risks, including fire, natural calamities, theft, and accidental damage. However, like most general insurance products, they almost universally exclude damage resulting from war, invasion, military actions, or acts of terrorism involving weapons of war. These are specified under the ‘war exclusion’ clause in the policy document," Dhake said.

"Therefore, if a missile were to hit a residential property during a wartime situation, the insurer would not cover the loss or provide any compensation for the damages. This exclusion is rooted in the principle that war-related risks are systemic and catastrophic in nature, making them commercially uninsurable through standard retail insurance. Some specialized war-risk insurance products do exist globally, but these are typically structured for commercial buildings or properties in conflict-prone zones, and are not widely available for individual homeowners. It’s important for homeowners to be fully aware of this exclusion so they do not assume protection exists where it does not. If someone lives in a sensitive region or is concerned about geopolitical threats, seeking expert insurance advice is advisable to understand any alternative protections available," she added. 

Given the current geopolitical climate, it is vital for individuals in sensitive regions to understand the limitations of their insurance coverage. Seeking expert advice on potential alternatives can provide clarity on what protections, if any, are available. 

 (Views expressed by the expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)