Cover Image for What is Kidnap and Ransom (K&R) Insurance?

What is Kidnap and Ransom (K&R) Insurance?

Everyone has seen ransom letters, either in the movies or news stories, demanding money for the safe return of a kidnapped victim. But have you considered what would happen if someone kidnapped you or a loved one and sent a similar letter to your family? Do you have enough expendable money to pay the ransom, and the expertise to negotiate a safe return? A kidnapping and ransom insurance policy helps bring you or your family member home safe, and ensures any money you spend doing that is reimbursed to you. 

What events do kidnap and ransom insurance cover? 

When one of these trigger events occurs, your policy would kick in:

  • Kidnapping (with or without a ransom demand): Your policy activates for a kidnapping event, even if there is no ransom demand. For example, a parent may kidnap a child because they want custody, not money. 
  • Extortion: If someone threatens to cause you or your family bodily harm unless you pay them, your kidnap and ransom insurance would kick in. 
  • Detention: If you are detained by a governmental agency—for example, if you are on vacation in Russia and arrested—your kidnap and ransom insurance would cover costs related to that event. 
  • Hijacking: If an individual takes control of your vehicle and forces you to drive them at gunpoint (or by some other threat of force or fear), It is covered by your kidnap and ransom insurance. 

What costs are covered under kidnap and ransom insurance?

When a kidnapper demands a payment of money for the safe return of a family member, your insurance will reimburse the cost of the ransom. If the ransom exceeds the amount you are able to pay at the moment, the insurance company can help you get additional funds to pay the full ransom, rather than simply reimbursing you. 

Crisis management expenses are also covered under this policy. This is the cost of an expert who aids the family by communicating with the kidnapper and developing a strategy to ensure the safe return of the kidnapped individual. 

Another covered cost is physician care, whether that be for physical injuries or mental health. After traumatic events such as these, professional medical support is often needed to help the kidnapped individual and their family heal from physical and mental harm. 

Who can be covered under the kidnap and ransom policy?

A kidnap and ransom policy can cover an individual, a family, or even an entire business. For example, it’s common for kidnappers to take an executive of a major corporation and demand a ransom. In these situations, the company can insure all of the executives, or even all of the employees who work for the company. 

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What is the average cost of a kidnapping?

In most movies, a kidnapper demands millions of dollars in ransom. This certainly does happen, but most kidnappers aren’t demanding such a high amount. The average cost of a kidnapping is $62,000. This is good news for the insured, as the policy requires that you pay the ransom first, and then will be reimbursed. It is far easier to raise $62,000 than $1 million. 

Misconceptions about Kidnapping And Ransom Insurance

There is a common misconception with kidnapping and ransom insurance that the policy is void if the insured individual knows the policy exists. This is not true. There are certain people—such as the insured,their immediate family, and possibly their attorney or accountant—who need to know about the existence of the policy during a crisis. Obviously, the policy should be kept confidential, otherwise it could make kidnapping the insured appealing due to the guaranteed payout. 

Another misconception is that failure to notify the insurance carrier of a kidnapping in progress will void the policy. In some instances, the kidnapper will threaten to kill the kidnapped individual if anyone is informed about phone conversations and ransom demands. You are not expected to take that risk to call the insurance carrier to preserve coverage.

A third misconception about kidnap and ransom insurance is that the policy isn’t effective in dangerous parts of the world. This is only partially true. Policies often include exclusions for Somalia in particular. While it is possible to find a kidnap and ransom policy if you are traveling to Somalia, it is difficult and significantly more expensive. 

The final misconception is about the rarity of kidnapping and ransom events. Kidnapping is occurring with far more frequency and tschemes are becoming more organized. 

Who needs kidnapping and ransom coverage?

  • People or Organizations Who Travel Internationally: If you regularly travel out of the country, this policy is a good idea. Tourists are often targets of kidnapping. This is especially necessary if you are traveling to high-risk countries. 
  • People With Significant Personal Wealth: If you have access to a large amount of money, you are more likely to be a target of a kidnap and ransom scheme. 
  • People Living Near The Southern U.S. Border: Kidnapping statistics are far higher in Mexico than in the United States. Living near the southern border can increase your risk, particularly because kidnappers are able to easily move you out of the country and cut you off from your contacts. 
  • Exchange Students: If you are spending a large amount of time out of the country as an exchange student, this policy is a good idea. 

The Bottom Line

It is easy to think it won’t happen to you, but kidnappings have significantly increased in frequency, and there are many things that can make you a target. A kidnapping policy not only ensures you will be reimbursed for any ransom you pay, but also covers the cost for a professional to aid you in getting your loved one back home. If you have questions about a kidnapping and ransom policy, give us a call and one of our insurance experts will help you determine if this policy is a good fit for you.

Austin Landes, CIC

About The Author: Austin Landes, CIC

Austin is an experienced Commercial Risk Advisor specializing in property & casualty risk management for religious institutions, real estate, construction, and manufacturing.

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