Essential Guide to Property Insurance in Japan for Non-Resident Foreign Owners

Japan has been experiencing a significant increase in non-Japanese property ownership in recent years, due to the depreciation of Yen, attractive real estate market, and opportunities for long-term investment. Japan has no restrictions on non-Japanese nationals to own property, and the requirements and processes to own property are generally the same as those for Japanese nationals.

However, owning a property is not just about purchasing it; it also involves responsibilities such as insurance, tax, and management. 

This article will explain the types of property insurance in Japan, how to reduce property costs, and the tips for choosing the right insurance. 

Challenges for Non-residents

Resident and non-resident foreign property owners in Japan face unique challenges when getting property insurance. 

1. Complex Insurance System

Japan has a complex insurance system, and choosing the right plan can be challenging. The type of insurance and pricing vary greatly depending on individual needs. 

2. Language Barrier

Understanding local laws and regulations, as well as the terms of insurance policies written in Japanese, can be very difficult. The language barrier often prevents property owners from choosing the optimal insurance plan, which can lead to significant problems.

3. Requirements for Non-Japanese Nationals 

Some insurance agents require an emergency contact person who resides in Japan and a domestic phone number. 

One customer shared their experience:

“I originally tried going through a local agent in Japan, but they required a Japanese phone number, which I can’t get without residency. While companies like Mobal cater to foreigners, their phone services stop working when you leave Japan, which isn’t ideal for emergencies.”

Read more about Javier Batista Santiago’s story of getting a house in Japan.

4. Insurance Bills and Notifications

For non-resident property owners, receiving insurance bills and notifications will be challenging. 

5. Solve Insurance and Property Management Problems with MailMate

MailMate can help you set up property insurance and act as an emergency contact for non-resident foreign property owners.

MailMate provides all-inclusive property management services, making it an ideal solution for managing properties in Japan from overseas. 

The service also includes handling mail through a virtual address, forwarding received mail, and providing translation services when needed. 

MailMate also facilitates bill payments and assists with yearly property tax payments. 

Sign up today to free yourself from the hassle of property management!

Types of Property Insurance 

In Japan, there are two main types of property insurance: Fire Insurance (火災保険 - Kasai Hoken) and Earthquake Insurance (地震保険 - Jishin Hoken)

Fire Insurance

Purpose of Fire Insurance

Fire insurance, known as 火災保険 (Kasai Hoken), is a general home insurance. Despite the name, fire insurance also covers damages caused by typhoons, floods, water leaks, theft, and other unintentional accidents.

What fire insurance covers varies depending on the specific plan, but the main coverages are divided into two categories: building coverage and household contents coverage.

Building Coverage

The primary purpose of fire insurance is to cover damages to buildings caused by fire hazards and various types of natural disasters.

However, building damage caused by disasters is typically only covered if the building is repaired every 10 years. Therefore, it is important to maintain regular upkeep and retain proof of any building repairs.

Household Contents Coverage

Fire insurance also covers damage to household contents caused by natural disasters and theft. Many insurance plans offer additional coverage for accidental damage to household content for an extra fee.

Factors to Consider 

When considering comprehensive fire insurance coverage, many insurance plans include protection for personal accidental damage as well. For instance, coverage may extend to situations like a child accidentally breaking a TV while playing, or accidentally spilling red wine on a carpet. 

However, basic plans do not include personal accidental damage coverage. Additional or all-inclusive plans tend to be more expensive.

Additionally, even if a basic insurance plan includes flood coverage, they might have strict conditions. For example, some policies only cover flood damage if the water level rises at least 45cm above ground level. This means that damage to a basement will not be covered, even when flood damage is otherwise included.

When choosing fire insurance, it is crucial to check the terms and conditions to understand what is covered and to determine whether a basic or comprehensive plan is more suitable for your needs.

Earthquake Insurance

Purpose of Earthquake Insurance

The purpose of earthquake insurance is to stabilize the livelihoods of those affected by earthquakes. The policyholder is required to set the insured amount for earthquake coverage within a range of 30%-50% of the amount of insurance provided by his or her fire insurance. 

Factors to Consider 

Earthquake insurance can be relatively expensive, and serious earthquakes occur infrequently. However, when earthquakes do occur, they often cause extensive damage. Purchasing earthquake insurance is highly recommended if your budget allows.

How to Reduce the Property Insurance Cost

1. Opt for Named Perils Coverage

Choose an insurance plan that covers specific risks instead of an all-risk policy. This can reduce costs if you are confident that certain risks are unnecessary for the property.

2. Avoid Over-Insuring

Ensure your coverage aligns with the actual cash value or replacement cost of your property and contents. It is important to avoid over-insuring the property’s worth.

3. Choose the Optimal Insurance for Your Needs

Choose an optimal insurance plan tailored to your specific type of property. For example, if you own a high-rise building (referred to as a “mansion” in Japanese), many insurance companies offer a “mansion plan” that excludes unnecessary risk coverage specific to high-rise buildings. Choosing the right insurance plan for your property needs can help reduce overall costs.

How to Choose The Right Property Insurance

1. Insurance Company vs. Cooperative Insurance

There are two main types of property insurance providers in Japan: Insurance Company (保険会社 - Hoken  Gaisha) and Cooperative Insurance(共済 - Kyosai).

A cooperative (Kyosai) is a non-profit organization established voluntarily by a group of people who aim to improve their lives through shared resources. Cooperative insurance operates as a mutual aid system, where members share their premiums to establish a collective fund. This fund is used to provide financial support during unexpected contingencies, compensating for financial deficits and stabilizing the lives of members and families. 

• Cost: Cooperative fire insurance is significantly less expensive than insurance from an insurance company.

• Coverage: The coverage provided by cooperative insurance is limited compared to that offered by insurance companies.

Conversely, insurance companies typically offer broader coverage, but their plans are more expensive.

2. Coverage and Cost

The greater the coverage, the higher the cost. It is essential to assess the risks specific to your property and select a policy that provides sufficient protection without unnecessary extras.

3. Contracts and Claims

Carefully review the terms and conditions of the insurance policy, including the claims process. Make sure that the insurer has a clear and straightforward claim procedure, and examine the deductibles and exclusions that could impact your coverage.

4. Benefit and Limits

Understand the maximum amount of coverage limits for the insurance plan, and ensure they align with the actual cash value or replacement cost of your property. 

Tips for Non-Resident Property Owners in Japan

Choose the Right Insurer 

Look for an insurer experienced in working with non-resident foreign property owners. 

Ensure they offer:

• Bilingual services

• Flexible payment options

• Tailored policies for overseas property owners

Appoint Professionals

Enlisting professional assistance is highly recommended. MailMate can help you set up property insurance and become your domestic contact in Japan. By simplifying the process, MailMate provides peace of mind and ensures smooth property management.

In closing

Owning property in Japan as a non-resident foreign national comes with unique challenges. Choosing the right property insurance is a key part of the process. By understanding your insurance options, reducing unnecessary costs, and partnering with professionals, you can streamline property management and enjoy the benefits of owning property in Japan with peace of mind.