6 Things to Consider When Looking for Life Insurance as a Foreigner in Japan

We all know that life insurance is an essential part of financial planning. However, very few of us stop to think about the financial consequences for our loved ones if we were to die unexpectedly.

An event like this would not only bring emotional distress, but also potentially catastrophic financial ruin. This is further compounded when it comes to life insurance as a foreigner in Japan.

Once you’ve decided you need life coverage, there are so many different types of coverage and policies that it can be an overwhelming experience. It may result in taking no action at all.

If you are a foreigner in Japan, deciding on coverage types can be even more challenging, as most local insurance policies are designed for the domestic market and are not suitable for expats who may not be in Japan forever, or for those who do not speak Japanese fluently.

Has tattoos? Surprisingly, this can also be a problem with some insurance companies. Insurers in your home country are also unlikely to authorize coverage for someone living internationally.

Here are 6 points to consider if you are thinking about getting life insurance for expats in Japan:

What is life insurance?
Life insurance is a contract between you and a life insurance company. You agree to pay the policy regularly and the insurer agrees to pay a sum of money to your beneficiaries if you die. It is designed to protect your loved ones after you die or if you can no longer work.

There are different types of life insurance policies with varying features and benefits, including term insurance, whole life insurance, universal life insurance, and variable life insurance. Premiums and coverage depend on the type of policy and individual circumstances.

With the right coverage, your family will have enough to cover outstanding debts and maintain their current standard of living.

Why do you need life coverage in Japan?
The most common reason for obtaining life coverage is to ensure that your family is financially secure if you are suddenly not around to do so.

Too often, when an income provider passes away, loved ones are forced to make difficult decisions during an emotionally difficult time.

Life insurance gives your loved ones the opportunity to adjust over time rather than having to move to a smaller home or find a new job right away. It can help your family pay off existing debts and mortgages, children’s education, keep living expenses on track, and much more.

Another reason for expat life insurance is to help offset the Japanese inheritance tax your family will have to handle if you die. Japan has high inheritance taxes, and as a long-term foreign resident, your family may be forced to pay taxes, even on your foreign assets.

One way to ensure your family can cover the tax is to obtain a whole life insurance policy for the amount your estate will owe. This way, your beneficiaries will not be forced to sell their home or other assets to pay the tax if they cannot cover the amount from other sources.

Do you already have some coverage through your work? It’s probably not a good idea to rely on that alone.
If you have coverage through your job, you should review how much protection you have and also what the terms and conditions are.

As a general rule, we advise keeping your private life insurance separate from your work insurance. Most employment insurance plans will only cover you for as long as the company employs you. In most cases, if you quit or are fired for any reason, your coverage disappears as well.

If this happens, you may be forced to get private coverage, which could be more expensive since you are older now.

For expats, a forced move to another country by your company could also cause your life cover to end suddenly.

Having private coverage ensures that no matter who you work for or where your career takes you, you’ll be able to keep your family financially protected. Employment insurance should be the icing on the cake, rather than your main source of coverage.


How much can you pay?
Before choosing how much coverage you and your family need, you need to decide how much of a premium you can afford. Failure to pay premiums may result in termination of your policy, meaning you may have to get a new policy with a higher premium when you are older.

Therefore, it is necessary to decide on an affordable premium for the policy rather than risk losing coverage completely when you fall on hard times.

It is also important to note that expatriate life insurance is only one component of one’s financial planning. Other areas should be considered, such as retirement planning, mortgage payments, and children’s education.

How much coverage and for how long?
The amount of life coverage you need depends on several factors. We delve into this topic in more detail in the article “How Much Life Insurance Coverage Do You Need?”

In any case, if your top priority is replacing income and protecting your family, then you should think about how much income will be lost if you die. This means not just the salary for one year, but for the number of years your family would need it.

Generally speaking, if you have a young family with young children who will depend on your income for the next 15-20 years, then the multiples of your annual salary that you need to replace will be higher.

You also need to add up any loans and financial responsibilities, education costs, funeral costs, and (potentially) tax obligations for your family. All of this needs to be balanced with a monthly premium that makes sense for your situation. There are general rules, such as 5-10 times salary for higher incomes. However, no rule will fit everyone perfectly.

How long should you be covered for? This will really depend on your particular circumstances and goals. If your top priority is to protect your family financially, you may want to choose a deadline that coincides with when your children are financially independent. The idea is that by then, you will have accumulated enough assets so that even if something were to happen, your spouse will be taken care of financially.

If you are a high net worth person living in Japan and hoping to stay long-term, then you should seriously consider a whole life insurance policy, which will give you the option of staying covered for your entire life. The payment on your death can be used to cover any inheritance tax liability.

Do you need a professional?
We recommend that you contact a financial advisor before deciding on a policy. Decisions about expat life insurance as a foreigner in Japan should be made in the context of an overall financial plan. There are many aspects of your personal finances that you need to evaluate before deciding on the right policy for you.

To make matters even more complicated, planning for death can be an emotional experience. Having an unbiased opinion from a financial advisor will benefit you when it comes to making the right decisions about your monthly budget, coverage, and policy term.