Earthquake Insurance in Japan: I Know I Should Cancel, but I Cannot

The money book Okane no Daigaku (The University of Money) says, “You do not need earthquake insurance.”
I looked into it myself, and I agreed.
But I have not cancelled my earthquake insurance. It costs 1,073 yen a month.

In my head, I understand.
But my feelings do not allow it.
This is how I honestly feel, in my 60s.

The book says you do not need earthquake insurance

Okane no Daigaku says that earthquake insurance is “basically not needed.”
The reason, it says, is that “it is harder than you expect to get the insurance money.”

I read an explanation by a person who works in non-life insurance.
It said earthquake insurance is especially not needed for household goods in a rented home and for condos.

The reality of the 4 categories: “partial loss” pays only 5 percent

I learned this for the first time when I looked into it. The payout is decided by 4 categories.

– Total loss: 100 percent of the insured amount
– Major partial loss: 60 percent
– Minor partial loss: 30 percent
– Partial loss: only 5 percent

The most common one is “partial loss.”
Even if your house is half destroyed, they do not pay by how it looks.
They do not pay by the repair estimate either.

Without thinking much, I believed that with earthquake insurance, I could repair a house that was about half destroyed.
That belief was my “misunderstanding of the coverage.”

Still, earthquake insurance has 2 good points

If I only write the bad points, it is one-sided.
It is not true that earthquake insurance has no good points.

The first one: it covers “damage caused by an earthquake,” which fire insurance does not cover.
If your house burns because of an earthquake, fire insurance does not pay.
Only earthquake insurance covers damage that comes from an earthquake.

The second one: in a total loss or a major partial loss, it pays a lot.
If a 34-year-old wooden house is hit directly by a quake of seismic intensity 7, the highest level in Japan, a total loss is possible.
If it pays 100 percent then, it can be the money to start building the house again.

The public support money for disaster victims to rebuild their lives is 3 million yen at most.
That alone cannot rebuild a house.
You can also see earthquake insurance as the thing that fills that gap.

My case: a wooden house, 1,073 yen a month

My home is a wooden house, 34 years old.
My earthquake insurance costs 1,073 yen a month (64,380 yen paid at once for 5 years).
That is about 13,000 yen a year. In 10 years, it is about 130,000 yen.

If nothing happens for 10 years, the 130,000 yen is gone.
If my house is half destroyed and they pay less than 500,000 yen, I would have been better off without it.
This is a story about numbers.

But in real life, I received 500,000 yen from my earthquake insurance after the Noto Peninsula Earthquake. The foundation had cracks, and it was judged “partial loss,” the lightest category. That was 5 percent of 10 million yen.

In my head, I understand. But I cannot cancel

500,000 yen is 500 months of premiums at 1,000 yen a month. That is more than 40 years. I will not say the insurance did nothing for me. But I also wonder if I will really get 500,000 yen again. I am still not fully convinced.
Even so, when I try to make the phone call to cancel, my hand stops.

What comes into my head are voices like these.

What if a big earthquake comes right after I cancel?
I do not want to quit and regret it.
The 130,000 yen I have kept paying will also be wasted.
Living on a pension, I cannot pay 5 million yen to repair a half-destroyed house.

These are all voices of feeling.
They are not about probability.
They are not about numbers either.

Even if they tell me to separate feelings and numbers

Okane no Daigaku says, “Think about feelings and numbers separately.”
I think that is right.

But even when I try to separate them, I cannot do it completely.
The numbers told me I do not need it.
My feelings tell me I cannot quit.

In psychology, this has several names.

– Loss aversion: the fear of losing is stronger than the hope of gaining
– Status quo bias: I want to keep things as they are
– Regret aversion: I do not move because I do not want to regret it
– Sunk cost effect: I do not want to waste the premiums I have paid

All of these are inside me.
If they have names, it means I am not the only one.
There must be many people in their 60s like me who feel the same thing.

Conclusion: I do not think I will renew it

Quit, or keep going?
I will not make the phone call to cancel right now. But the answer is almost there.

I will be honest.
I have not made up my mind yet. Even so, I do not think I will renew it next time.
I do not feel like sending the postcard right now, but I know that I am heading that way.

You may laugh and call me weak. But I think there are others in their 60s
who feel the same and are paying the premium again this year.

That is why I wrote this.
I did not write it to reach the right conclusion.
I wrote it so that people who keep paying while still unsure, like me, can feel they are not alone.

I had AI calculate the earthquake insurance premium with the terms of my policy. The price of earthquake insurance is the same at every insurance company. It is a system run together by the government and the non-life insurance companies, and all companies use the same price table. So if you know the terms, you can calculate the price.

My terms: a wooden house, 10 million yen for the building and 2.5 million yen for household goods, with a discount for the year the house was built, paid at once for 5 years. If I renew it, under the current price table it would be 59,220 yen for 5 years, or 987 yen a month. That is 5,160 yen cheaper than the 64,380 yen I pay now (if the price table does not change). The price table changed in October 2022, and for wooden houses in my area, the price went down by almost 10 percent.

You cannot buy earthquake insurance by itself. It comes as a set with a fire insurance contract. Both my fire insurance and my earthquake insurance end in March 2027. Whether I quit earthquake insurance will also be decided then.

— Me-me