If people cut off heads on TV blow up civilians wholesale, then they are terrorists. You are generalizing to stop the use of the word, just as those who overuse it do for their reasons. The answer is to apply the word correctly, not stop using it.
There are all sorts of ways to generate fear to advance political ends, and the only even-handed way to employ that term is to use it in all appropriate circumstances - which indeed would make the term so general as to be nigh-useless.
Which is my contention, and why we need to retire the word. There is nothing particularly special about head-chopping as a means of producing fear (I can think of many things scarier), and blowing up civilians wholesale is primarily the domain of governments, which are for some reason immune to the charge of terrorism even though they are far and away the biggest creators of fear for political ends there have ever been.