The terrorism coverage came about after 9/11 when insurance companies started to exclude acts of terrorism in their policies. The government came in and started a program to provide this coverage through TRIA - Terrorism Risk Insurance Act. This is an optional coverage, costs 1-3% of premium. (TRIA was also extended and continues to be extended as the government hopes the private market will pick up more and more of the risk, but no sign of that yet. Similar to the NFIP - National Flood Insurance Program - but let me get back on topic.)
It is found in PROPERTY policies, not LIABILITY policies. What the terrorism coverage will cover is your mutant vehicle in the event of someone committing a certified act of terrorism at burning man that damages or destroys your vehicle. I wouldn't really worry about purchasing it for a mutant vehicle unless it is worth a LOT of money. They key is something happening that is a "certified act of terrorism." The government decides what this is. Say someone decides to bring explosives and blow up your vehicle. Normally that would be covered under your policy. However, if the government certifies it as an act of terrorism, it is no longer covered, unless you have that coverage.
Either way, you need to either accept or reject this insurance in writing. Feel free to ask me any other questions on this or other insurance related issues. I am an insurance geek - I spend my free time reading insurance policies. Also, this is all stuff your agent should have told you. I fricking hate the people in my industry sometimes, but I digress...
- Insurance & Risk Management Consultant for Native American Tribes & Special Events. And First Time Burner