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What is kidnap and ransom insurance?

Updated: Jan 26, 2021

Kidnap and ransom insurance is somewhat a mystery to many. Many companies provide it and many wealthy people obtain it. Companies maintain it's privacy and secrecy because if it was known that people or companies had it there would be a target painted on the backs of many. A prime feeding frenzy by hostage takers. The movie "Proof of Life" with Russell Crowe depicts the brokering and negotiation of a hostage exchange.

The movie was based on a true life event in which Thomas Hargrove an American agricultural scientist and journalist was taken hostage in 1994 by the FARC guerrillas in Colombia. The captors thought he worked for the CIA and presumed he was a high value target. His family paid two separate ransoms which resulted in his release in 1995. He was taken so deep in the jungle that his captors marched him for two days to the exchange.

Kidnappings and abductions can happen anywhere but the K&R cases usually occur to the wealthy while travelling. Kidnappings for ransom can be a lucrative business for the perpetrators of these crimes. K&R insurance is intended to save people and companies from having to give up their fortunes. If you plan on obtaining this insurance you must understand how it works, know what it covers, and learn what it typically costs.

Some Americans traveling to certain foreign countries, high-net worth individuals, and famous people are most likely to need K&R insurance. In fact the U.S. State Department added an indicator for kidnap risk. If traveling to any of the countries on the list you want to consider getting K&R insurance. Coverage is often provided as part of a corporate insurance portfolio.

Since kidnappers often tell the victim's family not to speak to anyone it becomes challenging for the victim's family or company since they need to contact the insurance company. K&R policies often state that the family or company should notify the insurer ONLY when safe to do so. When that time arises, negotiation specialists and experts are deployed. Experts may include negotiators, ransom deliverers, evacuation specialists, and any other appropriate care (medical, counselors, chaplains, etc.) One main point must be emphasized. The ransom is NOT paid out directly by the insurance provider. The family or employer will need to pay it out of pocket. Only once the crisis is over will the insurer reimburse the policyholder.

K&R insurance protects corporations and individuals against financial loss from kidnap and ransom demands. It typically covers ransom payment, loss of income, medical care, and other items as well. In a worst case scenario funeral expenses can also be covered. The insurance policy is for those that travel frequently and not for brief trips. As a general rule, Americans should avoid travel in countries that appear in red on the map or say "Do Not Travel" on the U.S. State Department's travel advisory. Your K&R insurance policy may not cover you in those locations.

Lastly, the cost of a K&R policy may cost from $500 on up depending on the policy holder, travel frequency, threat levels, and other factors. It can become very costly. Many non-disclosure agreements accompany the policy. You must stay quiet about the existence of your kidnap and ransom insurance. Don't discuss it with anyone, not even family members covered by the policy. Talking about your policy may lead to a cancellation of the policy. Besides the possibility of painting a target on the company or policy holder, insurance companies want to protect themselves against false claims as well.

This article is not intended to scare Americans from travelling. The intent is to give a little insight on this type of insurance portfolio. In fact history shows that Americans or Expats are rarely targeted as it is a complicated business practice. Most kidnapping victims are from the same country as their captors.

Stay safe and stay vigilant.

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