A great new business opportunity has opened up in Nigeria. It has been your dream to partner with the local telecommunications company there to expand your business to this largely untapped market.
But, before you set off on this exciting new adventure, you decide to consult the US Department of State website to see if there are any travel advisory warnings you need to be aware of. According to the information there, there’s a high risk of getting caught up in civil unrest, terrorist attacks, high crime rates, and kidnapping.
Although you don’t plan to travel to any of the dangerous cities that are cited, your safety and wellbeing are a definite cause for concern.
If you’re ever in such a situation, namely – traveling to a country with an unusually high risk for kidnapping, you should consider getting kidnap and ransom insurance.
So, what is kidnap and ransom (K&R) insurance, and who needs it? This guide explores everything you need to know about it.
What Exactly Is Kidnap and Ransom Insurance?
Regardless of who you are, traveling to certain countries makes you a prime target for kidnapping. It is an extremely lucrative business for the perpetrators of these crimes.
The whole reason why kidnapping insurance exists is to save your family and those closest to you from having to give up a substantial portion of their life savings in ransom to protect you in the event a kidnap-for-ransom situation were to happen.
Ransom is the specific sum of money demanded by abductors in exchange for the release of the captive. It is the amount paid to secure a kidnapped individual’s freedom.
While it may be difficult to find the exact number of kidnappings that occur all over the world, what we can say for sure is that they happen more frequently than you think. Certain countries pose a higher level of risk to foreigners than others.
The ones that are known to harbor Islamist militia, guerrilla groups and criminal cartels record the highest kidnapping rates in the world. Some of the most notorious ones include Mexico, Colombia, Syria, Yemen, Libya, Somalia, Iraq, and Mali.
Any individual venturing into or doing business in a country that is a well-known hotbed for crimes – kidnapping and otherwise – should consider securing kidnapping and ransom insurance. While you should expect the best from your travels, it’s always a good idea to prepare for the worst.
Who Needs K&R Insurance?
If you do business in Mexico, the Middle East, Africa, Ukraine, or any of the 35 countries that have a city that would be considered a kidnapping capital of the world, getting hostage insurance is a must-have.
People who are prime targets for kidnapping include:
– Wealthy business people
– Ultra-high net worth individuals (UHNWI) and their families
– Professionals traveling abroad
– Aid workers
… and anyone else whose risk exposure makes them a kidnap-for-ransom target.
For the most part, K&R insurance coverage is a part of corporate insurance policies. The firms that use include K&R coverage generally have employees who frequently travel to parts of the world where kidnapping and extortion run rampant.
You’ll likely come across K&R insurance packages that include coverage for UHNWI, their spouses, children, close relatives, and members of their immediate household like the nannies and housekeepers. Other policies cover the individual themselves.
Given the high cost of K&R policies, it is typically individuals with a high public profile – like celebrities and politicians – who normally purchase them.
Universities that offer international programs for foreign students, non-governmental organizations (NGOs), and other international institutions based in kidnapping prone areas, often purchase K&R insurance.
They do this for their students, volunteers, or workers since the failure to do this opens them up to lawsuits if anything were to happen to those individuals.
What Does Kidnap and Ransom Insurance Cover?
K&R insurance protects individuals, corporations, and other institutions against potential financial losses that may result from kidnapping, financial extortion, and ransom demands. These policies are specifically designed for people who travel abroad frequently, and not necessarily for brief trips.
Most policies cover ransom payments, medical care, interest on bank loans, and the potential loss of income. Other policies also cover the costs associated with support services, public relations expenses, crisis management, and business interruption costs.
Policies purchased by employers for their employees are also designed to cover lawsuits against the company if the kidnapped individual decides to sue their employer for damages.
Depending on the type of policy you get, you might come across some that cover losses resulting from injuries suffered, time off from work after the individual is released from the hands of their captors, related travel expenses, costs related to cosmetic surgery procedures, as well as any reward monies paid to informants.
Some policies even cover damages resulting from wrongful detention, terrorism, and extortion. In worst-case scenarios, funeral expenses are also included in K&R insurance policies.
What to Look for in a K&R Policy
At a very basic level, you want to find an insurance package that covers these three main areas:
- A substantial payment amount that’s high enough to meet the kidnapping and extortion demands of the perpetrators, to ensure the victim’s safety.
- An emergency evacuation cover, particularly in dangerous and remote areas. Insurance providers retain the services of hostage rescue companies to ensure the safe extraction of the victim from the hostage site.
- A kidnap negotiation service with trained professionals to communicate directly with the abductors on matters relating to the payment and delivery of the extorted monies, and the safety of the victim.
The latter is particularly important since these experts are trained to know how to negotiate with the kidnappers to ensure that the release of the victim goes off without a hitch.
What K&R Insurance Policies Don’t Cover
At the risk of stating the obvious, you should never tell anyone that you have this type of insurance coverage. Publicizing it instantly transforms you into a walking kidnapping target. Besides, more often than not, divulging this information voids your policy.
At the end of the day, keep in mind that kidnap and ransom insurance companies (actually – all insurance companies) are running a business. Their goal is to run a profitable enterprise. So, they’ll find any excuse not to settle your claim if you violate any of the conditions set out in the policy.
Telling anyone who will listen that you have a kidnap and ransom insurance policy makes it hard for insurers to tell whether a hostage claim is genuine. So, to protect themselves against fraudulent ransom claims, insurance companies will likely cancel your policy if they get wind that you’ve been talking about it to people.
It is for this precise reason that most employees are oblivious to the fact that their employers have taken out K&R policies on them.
Stay Away from the Hot Zones
You should also steer clear of countries marked red on the US Department of State’s travel advisory map. The State Department urges Americans to avoid traveling to those specific countries. Ensure that you comb through your policy’s fine print to establish whether or not coverage extends to countries with Level 3 and 4 travel advisory ratings.
Insurance companies that cover such zones may connect you with security experts to educate you on how to stay safe when traveling to high-risk countries, and the places you need to avoid at all costs.
They may also require that you wear kidnapping prevention devices like GPS trackers that fit discreetly into your clothing or shoes. Some are designed to wear as wristbands and come with built-in sensors that transmit signals in real-time, even in the most remote locations.
That way, hostage rescue companies can track your location accurately and efficiently if you’re ever abducted.
Of course, proactive kidnap prevention measures are far preferred over reactive hostage rescue measures so, if you can afford them, you may want to consider hiring a specialized kidnap prevention service or team.
Common Policy Exclusions
K&R insurance may have the following limitations on coverage:
- Coverage limit: All K&R policies come with a cap on how much the insurance company will pay in ransom and other related benefits. Before signing on the dotted line, ensure that you’re comfortable with the coverage limit and understand the specific benefits that come with the policy.
- Geographical exclusions: What most people may not be aware of is the fact that K&R policies kick in on the specific days that you’ll be out of the country. So, you’ll need to have traveled outside your country of permanent residency to trigger coverage.
- Time-related exclusions: You also need to check the duration of coverage. While some policies cover you for the entire duration of your trip, others expire after a specific number of days during travel.
- Political limitations: More often than not, K&R coverage doesn’t apply if you travel to a country that the US has imposed sanctions on. It’s always a good idea to consult your insurance service provider to confirm that the country you’re traveling to is included in the coverage.
How Much Does Kidnap and Ransom Insurance Cost?
Like with all things, the cost of an insurance policy ultimately depends on the type of coverage, the coverage limit, the number of people under the policy, the country you’re traveling to, and whether or not it has additional monetary benefits. The more features a policy has, the more money you’ll have to pay in premiums.
A $5,000,000 K&R policy might set you back roughly $2,000 for a years’ worth of non-hazardous travel. If you’re traveling to a kidnapping hotbed, on the other hand, the cost of premiums goes up significantly.
Some companies offer pretty solid coverage for less than $1,000. You’ll need to do your homework and explore your options to see what the different insurance providers have in their policy portfolios.
Keep in mind though that the whole idea behind getting this kind of policy is to afford the ransom amount demanded by the abductors.
So, in the grand scheme of things, the amount you’re required to pay in premiums when traveling to a known kidnapping capital of the world is nothing compared to the hundreds of thousands or even millions of dollars that the kidnappers may demand in addition to the high cost of hostage rescue services if you’re ever abducted.
Travel Insurance and K&R
You may have come across travel insurance covers that offer K&R coverage. As great as that may sound, the coverage limits for the ransom part of such policies typically range between $5,000 and $10,000. This might not be enough to cover a ransom demand if you were abducted.
Security experts recommend getting policies that have minimum ransom coverage of at least $50,000. Some UHNWI may benefit from policies that offer up to $1,000,000 coverage.
Businesses, corporations, and institutions would need coverage that amounts to anywhere between $5,000,000 and $10,000,000, depending on the net worth of the abductee or the value of the entity.
Most travel policy providers don’t double up as K&R insurance companies. So, you won’t get premium level coverage from a conventional travel insurance policy.
Moreover, even those with a basic ransom cover may not offer value-added benefits like sending in extraction teams from the best hostage rescue companies to secure your release. If you’re going to get K&R insurance, you better pull all the stops to ensure you get a solid one. And keep in mind that even among K&R insurance providers, there are limitations and exclusions depending on where you need to travel.
The good news is that there are some K&R insurance providers that can get a policy in place relatively quickly, even if you are trying to put a policy in place within days of travel. We’ve identified specialized insurance firms that only handle K&R policies, so if you find yourself in a situation where you’re going to a dangerous place and need coverage in place quickly, we’ll help you find a provider with the questionnaire below.
Expect the Best But Prepare for the Worst
If you’re ever in a kidnapping and ransom situation, the good news is, the chances of survival are pretty high. You’re of value to your abductors only if they keep you alive. While the experience can be traumatizing, to say the least, with the right resources, you’ll be able to get out of that terrifying situation faster.
Purchasing kidnap and ransom insurance is a no-brainer, particularly if you’re traveling to a foreign country that doesn’t have a great track record when it comes to security-related issues.
While no one travels to a country expecting to be kidnapped, it doesn’t hurt to be prepared if the worst happens – at the very least, for your peace of mind. If you’re ever in such a situation, stay calm and focus on staying alive.
If you’ve taken out a K&R insurance policy, at least you’ll know that the top hostage rescue companies will work around the clock to secure your release and your insurance company will cover many of the high costs associated with your rescue.