> insurance generally excludes riot and terrorism from coverage anyway
If that's true, they'd have even more incentive to declare a claim as due to terrorism if you didn't have a rider. They could avoid paying it altogether.
But if you had a terrorism rider in those cases, then maybe it's worse for you, because then they wouldn't be denying the claim initially, but maybe instead you're stuck in a different process, with various downsides, and maybe less able to contest the assertion?
The question for that example scenario then is: would having a rider give the insurance company a viable option that is less-desirable to you.
(Such as because it delays you getting paid, you get paid less, it gets into a buck-passing Kafkaesque process between government and insurance company, there are less protections, etc.)
For example, if your insurance company would otherwise have to declare a claim as due to non-terrorism, and just pay it (because they'd probably lose in court if they didn't pay), but because you had the terrorism rider, they decide to declare it as due to terrorism, and then you get a less-desirable experience?
(For imagined example of less-desirable, maybe you have to wait longer to get paid while the company interacts with gov't, or the reimbursement is calculated or capped differently, or some consumer protection you'd normally have doesn't apply.)