Deposit insurance plays an important role in protecting depositors, ensuring that their assets are secure even when banking failures occur. Japan started its deposit insurance system in 1971 in order to protect depositors against financial turmoil and increase their sense of security. In this research, we first shed light on the structure of the deposit insurance system, and mention examples from Japan, a country that has more than four decades of experience in this field. After this, we offer an Optimal Premium Model (OPM) through which we calculate the optimal premium for the deposit insurance system. In order to find the optimal rates we use a Vector Error Correction (VEC) method, an approach proposed for forecasting financial assistance. Using optimal premium rates is a necessity for deposit insurance agencies in order to maintain financial system stability and protect depositors by ensuring the settlement of funds connected to failed financial institutions. We calculated this optimal rate for Japan during the period of 1992 Q1 – 2011 Q4, and found that the optimal rate for the Japanese deposit insurance system is higher than its current rate. Put simply, in order to secure financial system stability, Japan needs to raise the premium rate.