Life Insurance

If you have anyone that relies on your income to live, you need life insurance.
Life Insurance is insurance that pays a lump some of money if you were to die.

There are many different types of life insurance, the best and the cheapest is “term life insurance”.
Other types of life insurance are “whole life” or insurance with savings plans built into them.

Get your insurance from an insurance company and invest with an investment company.
These should not be mixed.

For Term life insurance you will need to choose amount and the term.
During the term the insurance premium is fixed.
After the term ends you can start a new policy if you like.

How much term life insurance should you get?
Term Life Insurance is relatively cheap approximately 1000-1500 yen / month for every 10M yen insured for a 30 year old male.

The calculation of how much you need similar to how much you need to retire on, except its not for you, its for the people that depend on your income to live.

For example if you want to replace your income you should get 12 times your annual income.
If your annual income is 8M yen you should get 96M yen of insurance.
If you were to die, your spouse or kids could invest that 96M yen at 12% into good mutual funds and draw 8% off the lump sump annually.
Doing this they would be able to receive 7.68M yen annually which is similar to the income that was lost.
The insurance payment would not be touched but continue to grow.
Do not eat the goose that lays the golden eggs!
If you have a house you may want to add that amount on to the insurance amount, although most home loans in Japan already include life insurance for the house only.

How long should the term be?
The term should cover you until have enough wealth that you do not need life insurance anymore.
In most cases this will be 20-30 years.
If you area following a good financial plan in 20-30 years the kids should be grown and finished with college debt free, the house should be paid off and you should have a personal wealth that would be enough for a spouse to continue to live off if you were to pass away.
Longer than 30 years and term insurance becomes expensive as it is covering you into the 50’s and 60’s +.

I personally have 20 years of term insurance which will cover me and my family until I am 50 and from there I can make a decision to get more term insurance or not.

If due to sickness or other reasons you believe you will not be able to obtain life insurance in the future it may be wise to get insurance for as much and as long as you can afford.