Yes, terrorism is covered under trip interruption/cancellation on many travel insurance policies. There can be stipulations for coverage, including that the event must be declared terrorism by local government or by the U.S. Department of State.
Additionally, there may be requirements that there has been no terrorism in the area for a specific period of time (7-30 days prior, for example).  Basically, if there has been ongoing terrorism and you travel there, coverage may be excluded.