What are the mandatory home insurance policies in Japan? (Is fire insurance compulsory? What about earthquake insurance?)

Okay, let me break down home insurance in Japan for you, keeping it simple and easy to understand.

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When Buying a House in Japan, Which Types of Home Insurance Are Mandatory?

Simply put, here's the conclusion:

• Fire Insurance (火災保険 / Kasai Hoken): Not legally mandatory. However, if you need a bank loan to buy the house, the bank will force you to purchase it. So for the vast majority of people, it's de facto mandatory insurance.
• Earthquake Insurance (地震保険 / Jishin Hoken): Completely voluntary, it's an optional rider. But I strongly, strongly, STRONGLY recommend you get it!

Let me explain in detail below so you understand why.

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1. Fire Insurance (火災保険 / Kasai Hoken) - The "Have-to-Buy" Insurance

Many people think Fire Insurance is required by Japanese law, but it's not. So why do we say it's mandatory?

The key is the "Bank Loan" (住宅ローン / Jutaku Loan).

Think about it: you borrow a large sum from the bank, say tens of millions of yen, to buy this house. For the bank, this house is their most important "collateral." If your house burns down completely, you might not be able (or willing) to keep repaying the loan, and the bank loses its money, right?

So, to protect their own interests, banks make purchasing Fire Insurance a hard requirement for loan approval. The contract will clearly state: no insurance, no loan.

• What if you buy the house outright with cash? Theoretically, you could skip Fire Insurance. But honestly, in a country like Japan where wooden structures are still common, the damage from a fire can be devastating. Risking a property worth millions of yen just isn't worth it. So, even cash buyers almost always purchase it voluntarily.

Important: Fire Insurance covers more than just "fire"!

Don't be fooled by the name. Basic Fire Insurance typically includes:

• Lightning strikes (落雷 / Rakurai)
• Explosions (破裂・爆発 / Harektsu / Bakuhatsu)
• Wind, Hail, and Snow damage (風災・雹災・雪災 / Fūsai / Hyōsai / Sessai)

You can also add optional riders based on your needs, such as:

• Water Damage (水災 / Suisai): e.g., flooding from typhoons or heavy rain.
• Theft (盗難 / Tōnan): If your home is burglarized.
• Accidental Damage (破損・汚損 / Hason / Osen): e.g., your child accidentally breaks a glass door.

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2. Earthquake Insurance (地震保険 / Jishin Hoken) - The "Strongly Recommended" Insurance

This is the point people care about most and get confused by most easily.

First, Earthquake Insurance is 100% voluntary. Banks don't force you to buy it, and the law doesn't require it.

But, here's a critical caveat you absolutely must know:

For all losses caused by an earthquake – including fires, building collapse, tsunamis, etc. – your standard Fire Insurance will pay you [not a single yen]!

For example: An earthquake occurs, shaking your house severely, causing a gas pipe to rupture and start a fire that burns your house down. In this case, even though it's a "fire," the root cause is the "earthquake," so Fire Insurance won't cover it. Only Earthquake Insurance will pay out.

Why is Earthquake Insurance so special?

• The risk is too high: A major earthquake could damage hundreds of thousands of homes simultaneously. No private insurance company could cover that cost alone.
• Government involvement: Therefore, Japan's Earthquake Insurance is jointly operated by the government and private insurers. The government covers the bulk of the payouts, making it more like a semi-public fund for post-disaster recovery and rebuilding lives.

Key points about Earthquake Insurance:

1. Cannot be purchased alone: Earthquake Insurance must be added as a rider to your Fire Insurance policy. You cannot buy it standalone.
2. Coverage has limits: The payout is not the full value of your house. It's typically 30%~50% of your Fire Insurance coverage amount. E.g., if your Fire Insurance covers 20 million yen, your Earthquake Insurance would max out at 6 million to 10 million yen.
3. Purpose isn't luxury rebuilding: The payout isn't meant to rebuild your house exactly as it was. Its purpose is to help you quickly recover basic living conditions and get back on your feet after a disaster.

Given that Japan is earthquake-prone, this investment for "peace of mind" is chosen by the vast majority of people.

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Summary

So, when buying a house in Japan, you can think of it like this:

Fire Insurance is your "entry ticket," and Earthquake Insurance is the "seatbelt" you buy for peace of mind in this "earthquake-prone playground."

Hope this explanation helps!