Table of ContentsWhen it comes to purchasing a house, acquiring adequate disaster insurance is a common practice. However, determining the appropriate insurance type can be a daunting task. This becomes even more crucial in Japan, a country prone to frequent natural disasters. Therefore, it is essential to make an informed decision regarding the insurance coverage that best suits your home. In this informative article, we delve into the coverage and indispensability of fire and earthquake insurance, the two most prevalent forms of disaster insurance. Whether you're currently in the process of buying a house or simply exploring your options, this guide aims to equip you with the necessary knowledge. Read on to find out the intricacies of fire and earthquake insurance coverage in Japan. Call or email us here >>What is covered under fire and earthquake insurance?Fire insurance is widely recognized as an indispensable form of disaster insurance to acquire when investing in a residential property. Its primary purpose is to provide financial compensation for losses incurred due to fire-related incidents within a building, encompassing single-family homes as well as condominiums.In the unfortunate event of a fire, whether it arises from personal negligence, deliberate arson, or even a neighboring fire, fire insurance ensures that you will receive appropriate compensation for the damages suffered. When procuring a fire insurance policy, the coverage amount is determined based on the assessed value of the property.In the event of fire-related damage, the insurance policy will promptly reimburse you for the actual extent of the harm sustained, up to the predetermined insurance limit. This ensures that you are adequately protected and alleviates the financial burden associated with fire-related losses.What Fire Insurance Coverage CoversFire insurance covers the following items:Buildings Household goods within the buildingHousehold goods in a building include clothing, furniture and appliances.Incidentally, when purchasing fire insurance, you can choose to have coverage only for the building or only for household goods.However, in the event of a fire, both types of damage can be significant, so it would be safer to have both types of coverage.More on what Fire Insurance CoversIn addition to fire, fire insurance provides coverage for the following types of damageWind damageLightning strikesHail and snow damageWater damageBlasts and explosionsIn addition to the above, they also provide coverage for incidents and accidents such as theft damage or a car crashing into your house.You can choose the coverage when you purchase fire insurance, so consider which coverage you should have depending on where you live.What fire insurance doesn’t coverConversely, fire insurance does not cover the following:Fires caused by earthquakes, eruptions, and tsunamiscars and sailing vesselsFinancial assets, intellectual property, and intangible propertyAnimals, plants, and other living things Items taken out of the buildingFires caused by earthquakes are not covered by fire insurance because of the damage they cause.Automobiles and boats are also not covered because they are located outside the building.Financial assets such as cash, electronic money, and intellectual property such as account books are not covered because they are not "household goods.The same applies to intangible property such as data and programs.Please note that even household goods that are taken outside the building are not covered.What does earthquake insurance cover?Earthquake insurance is typically purchased alongside fire insurance as a combined policy. It offers coverage for specific events like fires triggered by earthquakes, volcanic eruptions, and tsunamis. Unlike fire insurance, which we discussed earlier, earthquake insurance specifically addresses these risks.Given the significant damage often caused by earthquakes, such as the Great Hanshin-Awaji Earthquake and the Great East Japan Earthquake, this insurance is managed jointly by the Japanese government and non-life insurance companies. This collaboration ensures that the coverage and premiums remain consistent across different insurance providers.The amount of earthquake insurance coverage is determined based on a percentage (typically ranging from 30% to 50%) of the fire insurance coverage amount. Moreover, there are set limits for the coverage: up to 50 million yen for buildings and up to 10 million yen for household goods.Earthquake insurance overviewAs with fire insurance, coverage is provided for the building and the household goods within the building. It is also possible to choose coverage for buildings only or household goods only. Unlike fire insurance, however, earthquake insurance coverage is capped by law. Therefore, please note that not all damages will be compensated, even if the damage is large.What earthquake insurance coversIn addition to fire caused by earthquakes the following disasters are also covered:Damage resulting from earthquakes, volcanic eruptions, and tsunamisDestruction or loss caused by being buried or washed away during these disastersEarthquake insurance benefits are calculated based on the extent of the damage incurred. The payment percentages for insurance benefits are as follows:Total loss: 100% of the insurance amountMajor loss: 60% of the insurance amountMinor loss: 30% of the insured amountPartial loss: 5% of the insurance amountThe extent of damage is determined by looking at the main structural parts of the building, such as the roof and exterior walls.What earthquake insurance doesn’t coverEarthquake insurance does not cover the following items:If the household goods covered by the insurance are lost or stolenDamage to gates, fences, or hedges onlyDamage incurred more than 10 days after the earthquakeMinor damageWhen a major earthquake strikes, household goods may be lost or stolen while you are temporarily sheltered in an evacuation center.Unfortunately, however, earthquake insurance does not cover damage caused by loss or theft.Please note that it also does not cover damage after a certain period of time after the earthquake or minor damage that is not even a partial loss.Does my home really need disaster insurance?Now that you know what fire and earthquake insurance cover, you may be wondering whether you really need to purchase disaster insurance.Therefore, we will explain the necessity of disaster insurance in two parts.Fire insurance is needed when getting a home loanWhen applying for a mortgage loan to purchase a house, most financial institutions require fire insurance.This is because fire damage to buildings is significant, and the financial institution financing the purchase of the house wants to prevent risk by providing fire insurance.In addition, when you take out a mortgage loan, you are signing a contract with the house as collateral. If the loan is not repaid in time, the house will be sold or otherwise used to repay the loan. If the building is destroyed by fire while the mortgage is being repaid, you would have to continue to repay the loan with your own funds.Therefore, there is a need to purchase fire insurance during the mortgage repayment period.Earthquake insurance is necessary to rebuildIf a major earthquake were to strike, how much would it cost to rebuild one's life?According to the "Disaster Prevention Information Page" of the Cabinet Office, in cases where a house was completely destroyed by the Great East Japan Earthquake, the total cost of rebuilding a new house and purchasing household goods amounted to about 25.5 million yen.Since the public assistance, including donations, provided at that time was approximately 4 million yen, it would be difficult to prepare the remaining amount with personal funds.The above results show the high necessity of earthquake insurance.Of course, major earthquakes do not occur frequently, but since it is difficult to predict when and where an earthquake will strike, it is safer to have earthquake insurance.In addition, having earthquake insurance will help to hedge the risk in the event of extensive damage.In conclusionIn this article, we provided an in-depth analysis of the importance and extent of coverage offered by two crucial types of insurance: fire insurance and earthquake insurance. These policies are particularly relevant for individuals who are contemplating the purchase of a new house.Fire insurance serves as a safeguard against potential losses resulting from fire incidents in both single-family homes and condominiums. However, it's important to note that fire insurance not only covers fire-related damages but also provides protection against other perils such as wind damage and lightning strikes. This comprehensive coverage ensures that policyholders are financially protected in the face of various unforeseen events.On the other hand, earthquake insurance specifically caters to damages caused by seismic activities. It offers coverage for not only fire-related damages but also other types of destruction resulting from earthquakes. The coverage amount for earthquake insurance is typically determined by legal regulations, ensuring that policyholders receive the compensation they are entitled to in the aftermath of an earthquake.Given the comprehensive coverage provided by fire insurance and the specific protection against earthquake-related damages offered by earthquake insurance, it is highly recommended to secure both policies. By combining fire insurance and earthquake insurance, homeowners can significantly enhance their financial security. This approach ensures that they are prepared for a wide range of potential disasters and minimizes the financial burden associated with rebuilding or repairing their homes in the aftermath of an unforeseen event.In summary, it is crucial for prospective homeowners to consider the significance of fire insurance and earthquake insurance when purchasing a house. By obtaining both policies, individuals can enjoy comprehensive coverage that protects them against a variety of disasters and provides peace of mind in times of uncertainty.