Differences between Terrorism and Insurgency
If no single definition of terrorism produces a precise, unambiguous description, we can approach the question by eliminating similar activities that are not terrorism, but that appear to overlap. For the U.S. military, two such related concepts probably lead to more confusion than others. Guerilla warfare and insurgencies are often assumed to be synonymous with terrorism. One reason for this is that insurgencies and terrorism often have similar goals. However, if we examine insurgency and guerilla warfare, specific differences emerge.
A key difference is that an insurgency is a movement - a political effort with a specific aim. This sets it apart from both guerilla warfare and terrorism, as they are both methods available to pursue the goals of the political movement.
The ultimate goal of an insurgency is to challenge the existing government for control of all or a portion of its territory, or force political concessions in sharing political power. Insurgencies require the active or tacit support of some portion of the population involved. External support, recognition or approval from other countries or political entities can be useful to insurgents, but is not required. A terror group does not require and rarely has the active support or even the sympathy of a large fraction of the population. While insurgents will frequently describe themselves as "insurgents" or "guerillas", terrorists will not refer to themselves as "terrorists" but describe themselves using military or political terminology ("freedom fighters", "soldiers", "activists"). Terrorism relies on public impact, and is therefore conscious of the advantage of avoiding the negative connotations of the term "terrorists" in identifying themselves.
Terrorism does not attempt to challenge government forces directly, but acts to change perceptions as to the effectiveness or legitimacy of the government itself. This is done by ensuring the widest possible knowledge of the acts of terrorist violence among the target audience. Rarely will terrorists attempt to "control" terrain, as it ties them to identifiable locations and reduces their mobility and security. Terrorists as a rule avoid direct confrontations with government forces. A guerilla force may have something to gain from a clash with a government combat force, such as proving that they can effectively challenge the military effectiveness of the government. A terrorist group has nothing to gain from such a clash. This is not to say that they do not target military or security forces, but that they will not engage in anything resembling a "fair fight", or even a "fight" at all. Terrorists use methods that neutralize the strengths of conventional forces. Bombings and mortar attacks on civilian targets where military or security personnel spend off-duty time, ambushes of undefended convoys, and assassinations of poorly protected individuals are common tactics.
Insurgency need not require the targeting of non-combatants, although many insurgencies expand the accepted legal definition of combatants to include police and security personnel in addition to the military. Terrorists do not discriminate between combatants and non-combatants, or if they do, they broaden the category of "combatants" so much as to render it meaningless. Defining all members of a nation or ethnic group, plus any citizen of any nation that supports that nation as "combatants" is simply a justification for frightfulness. Deliberate de-humanization and criminalization of the enemy in the terrorists' mind justifies extreme measures against anyone identified as hostile. Terrorists often expand their groups of acceptable targets, and conduct operations against new targets without any warning or notice of hostilities.
Ultimately, the difference between insurgency and terrorism comes down to the intent of the actor. Insurgency movements and guerilla forces can adhere to international norms regarding the law of war in achieving their goals, but terrorists are by definition conducting crimes under both civil and military legal codes. Terrorists routinely claim that were they to adhere to any "law of war" or accept any constraints on the scope of their violence, it would place them at a disadvantage vis-à-vis the establishment. Since the nature of the terrorist mindset is absolutist, their goals are of paramount importance, and any limitations on a terrorist's means to prosecute the struggle are unacceptable.