What product in the self-storage industry impacts more people than tenant insurance? It touches the lives of tenants, facility owners and managers, bankers, insurance agents, and investors/partners.

When a customer purchases tenant-insurance coverage, hes protecting his property and obtaining peace of mind, often during stressful circumstances. Owner/operators can benefit in a variety of ways: They can increase their revenue stream, improve their capitalization (cap) rate, retain and recruit better managers, and have fewer liability issues to worry about. It certainly helps to mitigate bad press during the incident of a loss when you can say coverage is offered and available to all tenants.

Bankers are going to be happier with improved cap rates, reduced liability and better bottom-line performance of the properties on which they hold mortgages. Property and casualty (P&C) insurance providers will look favorably on a strong tenant-insurance program because it helps to manage risk at a self-storage facility. It may even lower an owners P&C rates at renewal.

For an investor/partner in a medium or large group, the administrative fees generated from a tenant-insurance program could garner enough revenue to buyor be used as leverage to buyadditional properties. There may also be tax advantages, depending on the type of program selected.

Finally, the person most affected by a tenant-insurance program is the self-storage manager. As the face of the facility on the front line, the manager is involved from the beginning of the sale through the lifetime of the rental. He has an opportunity to help customers by offering tenant insurance during the rental process. When coverage is purchased and the customer walks away with peace of mind, its a win-win situation.

Should a claim need to be filed, the manager can feel good knowing he helped to protect his customer. The tenant is happy with the manager for educating him, helping him to choose a coverage option, and ultimately getting him paid for his loss. Conversely, if there is no tenant-insurance program available or the manager fails to offer or educate on insurance, this same scenario could become very ugly, with no winners and plenty of headaches for everyone. Simply put, a tenant-insurance program is a valuable enhancement to your customer-service package.

In addition, when the manager is incented by receiving all or part of the administrative fee, participation in the program skyrockets! The standard admin fees for most current programs could be a nice supplement to the managers compensation package, and it gives him the power to improve his compensation on a monthly and yearly basis. Incenting managers also works well for the owner/operators, especially the absentee owner, because his manager is vested and involved in the program with every lease. The owner now has a rigid barrier to competition and a viable edge for attracting and retaining the best staff.

A Creative Approach

Tenant-insurance programs have other uses as well. Jim Chiswell, president of Chiswell & Associates LLC, suggests, Instead of all these crazy promotions such a $1 move in or free month of rent with a long-term lease, you could include the tenant-insurance coverage for free for the length of the rental. Compared to mandatory programs where you have to buy it or use a hard-sell approach, you can provide peace of mind for your tenants for their personal possessions and remove any doubt about whether or not they are covered. It then becomes tangible later and really promotes goodwill between your facility and your customer.

Chiswell says that if an owner required all customers to take tenant insurance or included it in the monthly rent instead of giving away the store with discounts, he may be able to get a reduced insurance premium from his commercial insurance carrier because it is being protected from small tenant claims by the tenant-insurance policy. If the owner adjusted rents to include the net premium amount, it could provide a competitive advantage as well. Instead of the long, mostly negative dialogue with new customers about their lack of coverage and the fact that they are not insured by the facility, they owner could simply say that when you store with the facility, you automatically have $2,500 or $5,000 worth of coverage.

Self-storage operators are faced with numerous choices in todays tenant-insurance marketplace, ranging from simple countertop brochures to warranty plans to exotic off-shore captives. Despite all the options, however, more than 50 percent of facilities still use the original brochure approach, created 35 years ago by self-storage pioneer T.L. Brundage and his insurance agent. Though it seems like an easy and reliable tenant-insurance offering, its time-consuming for the tenant (fill it out, mail it in, wait for the insurance), and it only has 1.8 percent participation.

While those countertop brochures sit and gather dust, the other 50 percent of self-storage facilities nationwide are enjoying benefits from their tenant-insurance programs: increased revenue, improved cap rates, lower P&C rates, fewer liability issues, happier/better managers, and enhanced customer serviceall valuable byproducts of tenant-insurance coverage.

Harry Sleighel is the chairman of Storage Property Protection Inc., which provides a tenant-property-protection program for the self-storage industry, and co-founder of Michaels Wilder, an agency that provides human resources solutions and marketing services. For more information about SPP, call 877.575.7774 or visit www.storagepropertyprotection.com .