Automobile Insurance in Japan

The NLIRO - The Official Regulators of Japan Auto Insurance

How the CALI System Started

Do Yourself a Favor - Buy Voluntary Auto Insurance in addition to CALI

Health Insurance in Japan

National Health Insurance vs. Private Health Insurance

Earthquake Insurance in Japan


Automobile Insurance in Japan

Automobile insurance in Japan is divided into two main policies: compulsory automobile liability insurance and voluntary automobile insurance. Compulsory automobile liability insurance (known as CALI) sprung to life off the country's security laws and became active in 1955. Its stance is clear - to provide coverage for bodily injury liability only with limits based on the severity of the injury. Voluntary automobile insurance covers a wider range of problems and include third party liability, self incurred personal accident, uninsured auto protection, and coverage for damage to one's own car.

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The NLIRO - The Official Regulators of Japan Auto Insurance

Premium rates for CALI and voluntary automobile insurance in Japan is regulated by the Non-Life Insurance Rating Organization of Japan, a non profit organization. The way it works is that most Japanese insurers are members of the NLIRO. Like the Mortgage Brokers Association in America, these member insurers work under the umbrella of NLIRO jurisdiction, which sets premium rates for all types of insurance minus life. Rates are determined according to fairness. Member insurers can set their rates according to reasonable, adequate, or less than adequate rates as determined by the NLIRO. They are not obligated to meet any criteria, although most do.

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How the CALI System Started

After World War II, automobile traffic in Japan was at its highest peak, with more than one million cars navigating the streets by the 1950s. This increased the number of accidents and became such as a problem that accidents tripled within six years. Prior to the Automobile Liability Security Law, traffic accident regulation was left to civil codes with looser provisions that required victims to prove the other party was totally at fault, which was notoriously difficult. Plus, with limited incomes, claims often went unpaid. The Automobile Liability Security Law was enacted in 1955 to help victims cope.

Under the CALI system, no automobile could be driven unless CALI has been taken out for that car. Failure to take out CALI can land foreigners in trouble in facing jail time or severe fines. A CALI certificate must be provided for upon registration and with every vehicle inspection.

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Do Yourself a Favor - Buy Voluntary Auto Insurance in addition to CALI

Unlike CALI, voluntary auto insurance has a broader scope of coverage. CALI is restricted to the owner and the driver of the car. With voluntary insurance, spouses and relatives are also insured. It covers the following as well:

• Bodily injury liability (VAI holds a higher coverage limit than CALI when your accident isn't limited to a minor fender bender)
• Physical damage liability
• Passengers' personal accidents
• Own vehicle damage
• Personal accidents caused by uninsured drivers

Plus, voluntary auto insurance policies are more flexible. You can take out a basic automobile policy where you could give or take different types of coverage, a comprehensive auto insurance policy where the five coverage types are included, or drivers' automobile insurance for people who do not own cars. According to the Non-Life Insurance Rating Organization of Japan for the year 2004, there were 78,000 automobiles registered. 71 percent held bodily injury liability coverage, 70 percent held property damage liability, 59 percent held personal accident, and 36 percent held physical damage liability. As you can see, voluntary auto insurance is the smarter and more important than CALI even though CALI is required by law and voluntary auto insurance isn(t.

Voluntary auto insurance premiums vary from person to person. It depends on vehicle type, drivers' license record, miles driven, drivers' age, and more.

Drivers facing greater liabilities than ever before

Did you ever get the impression when walking in the street that drivers here have little respect for pedestrians? While that may seem the case, when a driver hits a pedestrian, they are subject to severe punishment. There is even a prison especially made for drivers.

There have been increasing numbers of accidents in recent years caused by drunken driving. A few years ago, the police were given instructions to get tough with drunken drivers. In spite of that many people continued to take chances by driving while under the influence. Then there was a high-profile accident in August of 2006 in which a drunken driver hit a sport utility vehicle while on a bridge. The crash caused the sport utility vehicle to go over the bridge and three children drown. This caused a public outrage and the police and the courts are now more stringent than ever before.

Driving a motor vehicle in Japan in this day and age puts more responsibility in the hands of the driver!

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Health Insurance in Japan

If you decide to take out a health insurance policy in Japan, here are some critical things to know:

• If you've been living in Japan for more than a year, health insurance is absolutely required.
• Foreigners and long-stay tourists must have health insurance. You are not automatically covered once you enter the country.
• Most employers require their employees to have some form of health insurance.

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National Health Insurance vs. Private Health Insurance

There are basically two types of government Social Health Insurance in Japan. Employees Health Insurance (EHI) for employees of companies and National Health Insurance (NHI) for the self-employeed and retired. Although half of the cost of EHI is shared by the employer, paying the other half is still rather expensive due to its overall high cost.

Staying in Japan for no more than a year maximizes the costs of NHI, since its costs are based on your income from the last year. Since there is no official earnings record as a new member of the Japanese landscape, you will be assessed lower costs in the beginning. However, NHI really begins to hit home during the second year after many expatriates have filed income taxes for the first time. NHI bills may soar or increase steadily in response to an increase in income, which usually makes private health insurance more cost effective. In recent years the aging Japanese society has put a tremendous strain on the government insurance plans.

NHI and EHI provides only 70% of ones own health care costs. In its heyday, the EMI was a great plan to be on since out of pocket expense was only 10%. That gave way to 20% and now 30%. Private health care coverage costs less and covers up to 100% of expenses, depending on how much of a deductible you decide to pay, if any.

Once you join NHI, it is very hard to opt out of it. More and more foreigners are choosing private insurance during their first year, realizing a jump in salary could cause higher insurance fees if you are one of the government insurance plans. Even the slightest pay raise can greatly affect the premiums you pay.


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Earthquake Insurance in Japan

The Pacific Rim is home to destructive earthquakes and the next one could come at any moment. The Great Hanshin Earthquake and the recent quake in China are examples of the tremendous misfortune that can strike at anytime.

Entire fortunes have been wiped out in a matter of seconds. In the Great Hanshin Earthquake, even million dollar homes were lost. As expensive as property is in Japan one cannot afford to be without this coverage. For the most part, earthquake coverage is not available for commercial property in Japan. Additionally, most insurance coverage of this type has limited coverage, usually only up to 5 million yen. The insurance sold by Legend Travelers can cover property up to a FULL 100% of its value. It also covers commercial property. However, it is ONLY available to expatriates and foreigns companies in Japan and cannot be sold to Japanese citizens or Japanese companies.

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