Unless their dad is Liam Neeson, your clients might need this insurance
Kidnap and ransom policies cover negotiations, payments and extraction. But, shh, don’t tell anyone you have coverage
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Unless your father is Liam Neeson, you may want to consider kidnap and ransom insurance. People at risk of being kidnapped should think about this obscure policy option because not everyone has a father who is a former CIA operative to come to their action-packed rescue.
What is kidnap and ransom insurance?
Like the name says, it’s a reimbursement policy for incidents of kidnapping, ransom and extortion. It guarantees an immediate response, whether at home or abroad.
Plans are purchased through an insurance company, but what you’re getting is access to exclusive crisis firms that have experience in what the industry refers to as “K&R.” They will be the ones doing the work should you be kidnapped.
“Policyholders have access to the independent response consultants that their insurer has partnered with,” says Vancouver-based Wendy Sinclair of Arthur J. Gallagher Canada Ltd. “They will handle all aspects of hostage recovery, negotiations, local government liaison, protection and delivery of ransom funds.”
She says a policy usually includes:
- Ransom insurance
- Lost ransom insurance
- Response consultants’ costs
- Legal liability cover
- Additional expenses cover, such as medical expenses, the salary of a kidnapped employee, legal services, public relations, and forensics
- Death benefit and permanent total disability benefit
- Travel and housing costs for family members to fly to the country if requested
- Business disruption
- Political evacuations
Policies may also include pre-loss access to security training and consulting services, non-emergency phone consultation, and risk management guides with updated security bulletins for travel, Sinclair says.
Policies can include therapeutic services and even transportation costs for family members to go to the place the event occurred, said Todd Peterson, the Calgary-based vice president and head of HUB Private Client Canada.
Who is it for?
While the natural assumption is that this insurance is for high-net-worth families at home and abroad, businesses who operate in areas prone to kidnapping and extortion can also benefit from having this coverage for their employees. Other entities that might benefit are governmental and non-governmental organizations and mining and shipping companies.
“If they are frequently traveling to hotspots or zones where this type of activity is more prevalent, the policy can be tailored to reflect that,” says Peterson.
What makes this policy different from others is that it’s highly customizable, he says. One of his clients even covered their pet under the policy.
How much does it cost?
Because these policies are so customizable, the coverage and premiums vary, both Sinclair and Peterson said.
“Pricing is dependent on travel frequency and the security status of the travel destinations as well as who and for how many individuals the coverage is being arranged,” says Sinclair.
Peterson says that people interested in these policies meet with a risk advisor who performs due diligence. A simple policy with up to $5 million in coverage might cost as much as $2,000 a year.
“There are some standard pieces to all K&R policies, such as if there’s a ransom demand, the policy is intended to pay it,” he says.
Peterson says the cost will vary with the length of coverage, additional benefits you desire, the dollar amount in coverage and the number of people (or pets) you want covered.
Some policies offer threat assessments before a family or a business person takes a trip, he says. “The risk department will look at the location and the timing to see if it aligns potentially with an ongoing or upcoming political event that could be dangerous.”
What if you are kidnapped?
If it does happen, your policy goes into effect right away. Instead of calling the insurance company to make a claim, the policy provides a number to call so you get access to response consultants, who handle negotiations, the handover, any payments and extraction if needed.
Sinclair says the insurer reimburses the family for the ransom and pays all the response consultant costs.
Is everything covered?
As with other insurance policies, the insurer can decline to cover costs in certain circumstances. Companies might refuse to pay ransom to a terrorist group, for instance. They might also refuse to provide coverage to anyone who travels to a country that has been sanctioned by the federal government of Canada, such as North Korea or Syria.
People who have K&R insurance need to practice discretion, both experts say. Talking about the fact that you have this coverage increases your chances of being kidnapped. So it’s like Fight Club – the first rule is don’t talk about it.
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