Once you acquire a property in Japan, fire insurance becomes a practical necessity. While not a legal mandate, lenders and sound operations effectively require it. Earthquake insurance can be purchased only as an add on to fire insurance. Treat insurance as a mechanism to protect NOI and asset value, not merely as an expense.
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1. Coverage Basics and Common Misconceptions
Fire insurance can cover more than fire, including lightning explosion wind hail snow, plus apartment specific risks such as water leakage damage and theft breakage depending on the product. Building and contents are managed separately and owners typically insure the building while furnished rentals may warrant contents cover.
Earthquake insurance is attached to fire insurance. The sum insured is 30% to 50% of the fire policy and premiums vary by location and construction class. RC structures usually rate lower than wood.
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2. Setting Sums Terms and Deductibles
Current common maximum policy term is 5 years with long term discounts.
Set the building sum on a replacement cost basis. Using actual cash value can under insure and reduce payouts.
For earthquake insurance choose a sum within the allowed range and adjust the deductible typically ¥10,000 to ¥100,000 to balance premium and risk.
As a rough guide a single condo unit’s annual fire premium often falls in the ¥10,000 to ¥50,000 range depending on location structure and area.
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3. How to File Claims Efficiently
Notify the insurer immediately Capture wide shots and close ups For ceilings include all four corners and the stain close up.
Before repairs confirm insurer instructions Use only temporary protection until adjuster approval and obtain two estimates when feasible.
If a common area is involved inform the building association in parallel. For leaks from an upper unit assume first your own policy pays then subrogate unless clear negligence is proven.
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Case Study
In a Tokyo 1K a leak from the upper unit stained the ceiling and wall covering. The owner claimed under water leakage damage, submitted two estimates totaling ¥220,000 with a ¥20,000 deductible, and received ¥180,000. The association handled common pipe repairs. A one week temporary fix stabilized living conditions and avoided rent concessions.
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Takeaway
Design around coverage scope sum insured deductible term and how much NOI downside you can tolerate. Standardize evidence photos estimates and contact logs in advance so response time shrinks by several days when an incident occurs. Pair fire insurance with earthquake insurance at 30% to 50%, and review replacement cost and deductibles periodically.
