How to Choose a Guarantor Company and Fire Insurance—Wisely Deciding on "Fees Where You Have Choices" at Rental Contract
While guarantor companies and fire insurance are nearly mandatory expenses in rental contracts, they are actually items where tenants have some choice. This article explains the key points for comparison and practical selection methods.
When you look at the breakdown of initial rental contract costs, you'll see items like security deposit, key money, and agency fee, along with "guarantor fee" and "fire insurance premium." While these are treated as nearly mandatory expenses, they are also items where tenants retain certain options. Rather than simply accepting designated companies, you can optimize costs and coverage by comparing and reconsidering your choices. This article organizes how to choose guarantor companies and fire insurance from a practical standpoint.
Why Guarantor Companies Are Required and How They Work
In the past, it was common in Japanese rental contracts to have a family member or relative serve as a joint guarantor. However, with the progression of a declining and aging population, the rise of nuclear families, and increasingly strict risk management by landlords in securing rent collection, the use of guarantor companies has become nearly essential today. A guarantor company advances payment on behalf of the tenant when rent is in arrears, and then bills the tenant. For landlords, it enables stable rent collection; for tenants, it makes contracts possible without needing a joint guarantor.
When using such a service, you enter into a separate "guarantor delegation contract" and typically pay an initial guarantor fee of 0.5 to 1 month's rent, along with an annual renewal fee of ¥10,000 to ¥20,000. For a two-year contract, this works out to approximately ¥30,000 to ¥50,000 in running costs.
Can You Actually "Choose" Your Guarantor Company?
In many properties, the management company or landlord designates the guarantor company to be used, and tenants may not have the freedom to choose. However, some properties offer a choice among several guarantor companies, and in others, tenants can propose their preferred guarantor company. Before signing, try asking, "Is the guarantor company designated, or do we have options?"
When comparing guarantor companies, key points to consider include the initial fee rate (ranging from 30% to 100% of monthly rent), the annual renewal fee amount, whether monthly payment plans are available, the strictness of approval criteria, the scope of coverage beyond rent (whether renewal fees or restoration costs are covered), and whether they accept foreign nationals. For foreign residents in particular, choosing a guarantor company that offers multilingual support makes it easier to receive assistance after moving in.
Fire Insurance Is Nearly Mandatory—But You Can Choose the Coverage
Fire insurance is often treated as a mandatory requirement in rental contracts, and it's typical to pay around ¥15,000 to ¥25,000 for two years at move-in. Products recommended by real estate companies are usually partner products. While going with those recommendations is convenient, the reality is that most properties allow you to obtain a different fire insurance policy.
Fire insurance typically offers three main types of coverage. The first is "household contents insurance," which covers damage to your personal belongings from fire, water leaks, theft, and other causes. The second is "tenant liability insurance," which covers your liability if your negligence causes a fire that damages the landlord's property. The third is "personal liability insurance," which covers your liability if water leaks to a lower unit or you cause damage to others in daily life.
If you choose your own fire insurance, you can adjust the coverage amounts to match your lifestyle. A single person with few possessions can reduce coverage and save on premiums, while a family with more belongings can opt for more comprehensive coverage. Many products cost between ¥4,000 and ¥8,000 per year, and you can often save ¥10,000 to ¥20,000 compared to the designated product.
Important Points When Choosing Fire Insurance—Tenant Liability Coverage Is Essential
When selecting your own fire insurance, one element you absolutely cannot omit is the "tenant liability insurance" rider. This covers your damage liability to the landlord and is typically required by the rental contract. Recommended coverage is between ¥10 million and ¥20 million. Even a small fire can result in repair costs in the hundreds of thousands of yen, so it's important to set a sufficient amount.
Personal liability insurance is also worthwhile, with coverage of around ¥100 million to protect against water leaks to lower units or bicycle accidents. An additional monthly cost of just a few hundred yen can significantly reduce your financial risk in an emergency.
When you contract for fire insurance that you've selected yourself, the normal process is to submit a "copy of your insurance certificate" to the real estate company as proof that you meet the coverage requirements stated in the contract. If you forget to submit it, you could be in breach of contract, so make sure to complete this procedure before moving in.
Earthquake Insurance—Consider It Together with Fire Insurance
Fire insurance alone does not cover damage from earthquakes or tsunamis. Earthquake insurance can only be added as a rider to fire insurance. For those living in a country with high earthquake risk like Japan, especially in areas with high disaster risk, it's worth considering.
Earthquake insurance premiums vary by building structure and location, but many products can be added as an extension to household contents insurance for just a few thousand yen per year. Coverage is capped at 50% of the fire insurance amount, but this is sufficient to serve as start-up capital for rebuilding your life after losing your belongings.
Practical Steps for Choosing—Secure a Consulting Resource
To wisely choose a guarantor company and fire insurance, the most important thing is to allow time before signing the contract to gather information. If you tell the real estate company, "I'd like to consider guarantor companies other than the designated one" or "I'd like to choose my own fire insurance," they will usually accommodate you flexibly. There's no need to be shy about asking.
If you're looking for rental properties in the Sendai area, Sorou lets you compare multiple properties while checking the guarantor company and fire insurance terms offered for each, giving you a sense of the regional market rates. Additionally, M-Assets, known for solid management practices and track record, provides thorough explanations of how guarantor companies and fire insurance work, so first-time renters can confidently compare their options.
Guarantor fees and fire insurance premiums are not small amounts when looked at over a period of years. Rather than accepting what's offered to you, adopt an attitude of "choosing for yourself" to optimize both the overall cost and peace of mind of your rental life in 2026.
