Disability Insurance in Japan

What happens if you don’t die?


Many people (maybe even too many people) have life insurance in Japan. Far fewer have disability insurance. Today’s post takes a look at some of the options if you are afraid of becoming permanently unable to work.

Nenkin

The national pension scheme includes disability insurance. This is shougai kosei nenkin or shougai kokumin nenkin, depending on which one you are paying into. The amount you receive depends on the severity of your disability (classified on a scale of 1-3) but seems to be roughly the same as the pension. This type of disability insurance pays out until you reach pension age, at which point you start receiving that instead.

Life Insurance

Some life insurance policies include payouts for severe disability. This includes things like losing your sight, losing the ability to speak, paralysis, etc. You’ll have to check your policy or ask your rep about this.

Disability Insurance

You can get specialised disability insurance.  This appears to only pay out a (relatively small) lump sum in the event of becoming disabled, with a view to making a home barrier-free or preparing for life with the disability. Doesn’t seem worth it if you can self-insure, as you would build up the amount of the payout after paying the premiums for ten years or so.

​Income Support Insurance

Another option is income support insurance. This pays out a monthly income until you reach pensionable age. Unfortunately the income seems to be capped at 100,000 yen per month, which even combined with the nenkin disability is unlikely to replace most people’s income. Given the limited protection and miniscule chance of becoming disabled I am not sure this makes much sense either.

Job

In some cases your job can provide protection if you become disabled. A colleague of mine had a stroke and was unable to continue working, but the university paid most of their salary until they reached retirement age (for a period of three years).

Also if you are eligible for taishokukin it may pay out at an increased rate if you become disabled (particularly at work).

Overseas Disability Insurance

Someone posted this expat insurance on the Facebook page. I asked them for a quote and it ended up being $1200 a year for $45,000 income replacement (based on my salary of $60,000). They don’t pay for the first three months and there is a lot of fine print. It’s a British company, so they may be a lot more weaselly than the Japanese insurance companies I have dealt with here in Japan. The actual insurer is Allianz, so it might be worth seeing if they will do a policy directly.

So what to do? As with all things financial it is going to depend on your situation and your goals/character/decisions.

Looking at the options above, I think we will self-insure. We have a fairly substantial nest egg at this point, so we could probably survive on nenkin disability insurance plus spending down our capital for a while if we had to.

Also while I am employed my job is pretty bullet-proof so would provide additional cover. I no longer have life insurance as our children are all independent now and my wife would probably be okay running her business and dipping into our investments if anything happened to me.

It doesn’t seem worth it for me to get disability or income protection insurance in Japan. The expat insurance above isn’t compelling either, as it seems fairly expensive for something that is both unlikely and not disastrous (for us). Remember, the main purpose of insurance is to protect you from catastrophic damage. Becoming disabled would be pretty catastrophic on a personal level, but I think we would survive it financially.

How about you? Are you making provisions for disability?

3 Responses

  1. “A colleague of mine had a stroke and was unable to continue working, but the university paid most of their salary until they reached retirement age (for a period of three years).”
    For the private system I think what happens is that after a certain period (a month or two?) the school is allowed to reduce your salary by half, but that the 私学共済 system then pays enough to get you back to about 80%. I think that after a more extended absence, the school can reduce salary further, and the 共済 system again takes up the slack. (But I’m unsure if it remains at 80% of regular salary level, or if it falls to something less.)

  2. I did a bit of research on this last year when I was looking for disability/long-term illness insurance provider. IMO, disability insurance is the most important type of insurance for any breadwinner. Not only would you lose your livelihood for your family, you would become a financial burden on your family if you experienced a long-term illness/disability.
    Kosei nenkin would give about 70,000 yen/month (not enough to live on). The highest disability insurance I could buy through the private Kosei plan pays out 100,000 yen/month (again, not enough to live on). So in the end, I had to go with an overseas provider, which is $800 US/year in premiums, but the payout is 30,000 US dollars/year until age 65. This is enough to live on, so I felt I had no choice but to go with this option.
    (I can’t recommend a specific provider as I got it through a special connection with my old employer, but Allianz is a good provider with competitive prices from what I know).