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Nuclear meltdown insurance

By Jay MacDonald · Bankrate.com
Friday, March 18, 2011
Posted: 10 am ET

It may be impossible to measure the human toll from last week's 9.0 earthquake in northeastern Japan considering the uncertain future ahead for thousands of survivors now exposed to massive doses of radiation from the area's damaged nuclear power plants.

Insurance modeler EQECAT estimates the insured loss from the quake, including the fires and tsunami that followed, at $12 to $25 billion. Boston-based AIR Worldwide pegged its insured-loss estimate at $15 to $35 billion.

Your homeowners insurance won't help you in the event of a nuclear plant accident. Fortunately, our government long ago mandated a contingency plan that does.

These estimates take into account expected claims from homeowners insurance, auto insurance, life insurance and personal insurance lines, as well as commercial claims. They do not include damage to or claims against the affected nuclear facilities.

The rural nature of the quake's impact zone helped to contain the economic impact to the region, which Credit Suisse estimates at $171 to $183 billion. That's less than half the economic loss from the 1995 earthquake in Kobe, Japan, that affected many more commercial facilities, highways and office buildings.

Here in the U.S., homeowners insurance won't cover tsunami flooding; you need federal flood insurance for that. The same goes for earthquake damage, which typically requires separate earthquake coverage. But the comprehensive portion of your auto insurance policy  typically does cover flood-related damage.

As for exposure to radiation or property damage resulting from a compromised nuclear power plant, homeowners insurance policies include a nuclear hazard clause that specifically excludes most coverage, with the possible exception of fire resulting from a nuclear accident.

But thanks to the Price-Anderson Act, you don't need nuclear hazard insurance -- even if it were available, which it isn't due to the catastrophic nature of such an event.

In 1957, the government mandated that the U.S. nuclear power industry maintain an insurance fund, currently $12.9 billion, to pay liability claims for personal injury, sickness, disease and death, property damage and loss, and living expenses for displaced victims resulting from a nuclear accident at a commercial nuclear power facility.

To date, that fund has paid out $71 million in claims resulting from the 1979 accident at Three Mile Island.

When it comes to the nightmarish possibility of a nuclear meltdown near our homes, Congress has made sure that our coverage exceeds that of any homeowners insurance policy.

Let's hope we never have to use it.

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