What is the price of fire insurance?

What is the price of fire insurance for a single house? How to reduce insurance premiums and when to get insurance

If you buy a house, many people will consider buying fire insurance just in case. Choose fire insurance appropriately to reduce financial damage in the event of a disaster. However, as you make preparations, there may be many things that you do not understand, such as "how much is appropriate" and "how to choose and when to proceed." So, this time, I have summarized what you want to know when you join the fire insurance, such as basic knowledge of fire insurance, market price of insurance, how to keep the insurance price cheap and when to purchase.

What is home fire insurance?

First, let's briefly understand what fire insurance is like.
Fire insurance doesn't just cover fire
Although "fire insurance" may have the image that it covers only the damage caused by a fire, its name covers not only the fire but also various disasters. Typical examples other than fire include lightning strikes, explosions, wind disasters, hail disasters, snow disasters, water disasters, water wetting, external collisions/falls/incomings, violence due to collective action, and theft.  There are many products that can be selected as needed. Another point is that in addition to “buildings”, “household goods” can be covered. In many cases, you can select 3 patterns: building only, household goods only, and building + household goods.

Let's know the misfire liability law
What you need to know when you take fire insurance is the "Misfire Mistake Law". To put it simply, "there is no need to take responsibility for damages if the misfire causes serious damage to the house of another person, unless the misfire is grossly negligent." In other words, even if your house burns due to the fire of your neighbor, you cannot claim damages to your neighbor. If you understand this point, you will understand the importance of fire insurance.

If you want to prepare for an earthquake
Fire insurance covers a wide range of insurance, but damage caused by an earthquake is not covered. The reason is that the damage caused by an earthquake is likely to be large and cannot be covered by insurance companies alone. If you want to prepare for an earthquake, you need to join earthquake insurance, which is run jointly by the public and private sectors. For many fire insurance, earthquake insurance can be added as an option, so it is a good idea to consider when purchasing fire insurance.

What is the market price for fire insurance premiums?
When you take out fire insurance, you may be concerned about insurance premiums. In conclusion, there is no clear quote for fire insurance premiums. This is because there is a considerable difference depending on the building structure, location, compensation details, etc., ranging from 20,000 yen to 200,000 yen or more (for a 5-year lump sum contract).

Why is there such a difference? Let's explain how the insurance fee is determined.

How are insurance premiums decided?

The insurance premium for fire insurance is mainly determined by the structure of the building, the exclusive area, location, compensation details, special provisions, insurance period, and insurance amount (compensation limit).

Building structure
Reinforced houses and wooden houses differ in how they spread during a fire. Therefore, the structure of the building has a large impact on fire insurance premiums. In the case of a detached house, it is classified into T structure (fireproof structure) such as concrete structure and steel frame and H structure (non-fireproof structure) such as wooden structure and earthenware structure, and the T structure has a lower insurance premium. However, even if it is a wooden structure, fire-resistant buildings and semi-fire-resistant buildings are T structures.

Exclusive area of building
The larger the exclusive area, the higher the insurance premium.

Location
Disaster risk varies from region to region. Insurance premiums are set higher in areas with many natural disasters. For example, in Kyushu and Okinawa areas where there are many typhoons, insurance premiums tend to be higher than in other areas. In addition, the level of firefighting facilities is also taken into consideration in the insurance premium. There is an image that fire insurance costs may be high in the Tokyo metropolitan area where houses are densely populated and disaster damage is likely to be large, but since fire extinguishing facilities are substantial, it is surprisingly low.

Compensation content
What kind of disaster to prepare for is an important point in determining insurance premiums. Naturally, the insurance fee will increase if the compensation content is increased. Also, it depends on whether you are only compensating for buildings or including household items.

Special contract
Many fire insurances have special contracts. The main special contracts are "personal liability compensation special contract", which allows you to receive compensation when you are liable for damages due to an accident in your daily life, and a "spreading fire damage compensation special contract" for compensation when a fire causes damage to neighboring houses. If you attach these, the insurance premium will increase accordingly.

Period of insurance
The contract period for fire insurance is from 1 year to a maximum of 5 years, and the longer the contract period, the cheaper the insurance premium.

Insurance amount (compensation limit)
The higher the insurance amount (compensation limit), the higher the insurance premium. In case of fire insurance, the appraisal value (repurchase price) of the building is a guide, and the insurance amount is set based on this. The replacement price is the amount that will be charged if you try to acquire an equivalent property if the building is completely damaged. If it is a detached house, the building cost will be the evaluation value. ​The point is that the evaluation amount and the insurance amount should be equal (at least 80% or more). Because if you set the insurance amount below the assessed value of the building, you will run out of funds when you restore or rebuild. Also, even if you set the insurance amount above the evaluation amount, you cannot receive the insurance amount above the evaluation amount.

How to keep fire insurance costs low in a single home

Then, let's introduce the method to reduce the fire insurance premium in a single house.

Narrow down compensation
The best way to save fire insurance is to reduce the amount of compensation. But it's not just about reducing it. The point is to determine the necessary compensation. For example, if there are no rivers or mountains nearby and you are not likely to be damaged by typhoons such as flooding or landslides, you may be able to remove the "water disaster" compensation. On the other hand, if the building faces a road with heavy traffic of cars and bicycles, we would like to consider compensating for “external collision”. It is the same with the special contract to determine. In particular, the personal liability compensation covenant is a covenant that can be set for car insurance and credit cards, so make sure that you have not double-enrolled. Also, earthquake insurance varies by tens of thousands of yen depending on the prefecture, and insurance premiums are not cheap, so if you are conscious of saving money, you may be wondering whether you should take or not. However, as long as you live in Japan, you cannot avoid the risk of earthquakes, so you should subscribe as much as possible. Earthquake insurance has a discount system such as seismic isolated building discount and earthquake resistance class discount, and it is also subject to tax deduction because it is highly public insurance. It is possible to reduce insurance premiums by utilizing these systems.

Prolong the insurance period
Fire insurance offers discounts on contracts for more than two years. Therefore, if you are interested in saving money, the longest insurance period of 5 years is the best deal. Depending on the insurance company, you can expect a discount of up to 20%. However, long-term contracts are basically paid in one lump sum. Let's decide while consulting with the budget.

When should you get fire insurance?

Upon delivery of the house, all damages are the responsibility of the owner. It is safe to contract fire insurance so that it will be covered from the date of delivery. The timing to start preparation is when a mortgage loan is signed by a financial institution. This is because many financial institutions also include fire insurance so that mortgage contractors can repay their loans smoothly even if they suffer a disaster. Unless you are on a mortgage contract, you should start preparing a month and a half to two months before your home delivery date. Having a margin will allow you to carefully select and choose insurance.

Summary

Fire insurance covers various disasters and daily problems other than fire.
The insurance fee depends on the building structure, occupied area, location, compensation, special contract, insurance period, insurance amount, etc.
It is safe to start preparing for the purchase one and a half to two months before the date of delivery.

If you would like more information on fire insurance, please contact us. We do not carry out insurance agency business, so we will introduce an appropriate insurance company.