Earth quake insurance in Japan

Here I want to explain about earth quake insurance ( Jishin Hoken ) in Japan.

When you think of buying real estate in Japan, you may think of earth quake insurance.

Even if you insure your property against fire, you can not receive insurance amount from insurance company, when a fire is caused by earth quake.

Some people think that when there is large earth quake in Japan, insurance company will belly up and customer can not receive money from insurance company.

However, insurance company will not go bankruptcy owing to massive earth quake.
The Japanese government reinsures Insurance company for that cases.

When large earth quake occurs, insurance companies need to pay a lot of money to their customers.
But, Japanese government takes preparation for this case.
Japanese government reinsures these liabilities underwritten by private insurance companies.
Japanese government keeps these funds separately from other funds.

There is limit of total amount to be paid for insured people.
When a massive earth quake occurs, limitation of total amount paid by all insurance companies is 5,5 trillion yen
( 5,500,000,000 yen ).
In year of 2011, there was massive earth quake in Japan.
The toll of dead and missing was about 20,000.
In this case, insurance amount paid by insurance companies was 1,234,593,294,000 yen.
So, there was enough money in reserve.

You can insure your property of residence, apartment for renting out.
But, you can not insure your property of office, warehouse, shop.
So, you can insure your hotel in Japan as long as you live in one of the room.

Assumed that you purchase an apartment of 200 yen in Japan.
And the amount of consumption tax is 10 yen.
In this case, purchase amount correspond to building is
10 yen ÷ 0.08 ( Rate of consumption tax ) = 125 yen.
And purchase amount correspond to lot is 200 yen – 125 yen = 75 yen.
In this case, you can purchase fire insurance of 125 yen.
But, you can purchase earth quake insurance of around 60 yen.

You can look at more details about earth quake insurance in Japan.
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