Danshin: Understanding Japan's Mandatory Mortgage Insurance

Note: This content is specific to the Japanese mortgage market.

Danshin (Group Credit Life Insurance) is a unique feature of the Japanese mortgage system. Unlike in other countries where life insurance is an optional add-on, in Japan, enrollment in Danshin is a mandatory requirement for almost all private bank loans.

What does it do?

If the borrower dies or suffers severe disability, the insurance company pays the bank the entire outstanding balance of the mortgage. The family inherits the house debt-free.

The Cost: It's (mostly) Free

• Private Banks: The cost of standard Danshin is usually included in the interest rate. If a bank advertises 0.4% interest, that includes the life insurance.
• Flat 35: For government-backed Flat 35 loans, Danshin is optional. If you choose it, you pay an extra annual fee (approx. 0.2% of the balance).

Cancer Riders (Gan-Danshin)

Many banks compete by offering enhanced Danshin. The most popular is the Cancer Rider.

• Benefit: If you are diagnosed with cancer (Stage I or higher), your mortgage balance is cut by 50% or even 100% immediately.
• Cost: Some banks offer the 50% coverage for free. For 100% coverage, they might add +0.1% or +0.2% to your interest rate.

Conclusion

Danshin provides incredible peace of mind. However, if you have pre-existing health conditions (diabetes, high blood pressure) and are rejected for Danshin, you generally cannot get a private mortgage in Japan. You would have to apply for a Flat 35 without insurance or look for "Wide Danshin" (relaxed criteria) options.

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