Keeping Your Business Insurance Costs in Check
By David Wilhite
The self-storage industry has undergone tremendous changes over the past 20 years, evolving from a core group of small "mom and pop" operations to a large, powerful organization of professional business people. The rapid growth of the industry has further created a variety of challenging new issues, many of which we are just coming to terms with.
When the self-storage industry was young, so were its buildings. Facility owners had secure new roofs that did not leak, factory-fresh doors that properly sealed their units, and less crime at their facilities. This environment was very attractive to insurance companies, several of which developed products specifically for the industry. These specialty insurers provided better coverage than what was generally available at the time, and many offered significantly reduced premiums for substantial savings.
While the self-storage industry was maturing during the late '80s, so were its buildings. Due to various challenges of the time--primarily the recession--maintenance was deferred in many facilities. In addition, the criminal element discovered self-storage facilities were an ideal place to conduct their activities. These developments caused insurance costs to rise and claims activity to increase dramatically in certain areas, such as customers' goods legal liability.
Customers' goods legal liability is an important coverage specific to our industry. The basic premise of self-storage is that we act as a landlords, not warehousemen; we never take possession of our customers' goods. Therefore, we are not responsible for those goods since we are simply renting space. However, there are certain situations that can create legal liability on your part for damage to your customers' goods. For example, by providing a building to store goods, we represent protection against the elements. If a customer's goods are damaged by water, he may feel you were somehow negligent in honoring that representation.
If you are found legally liable for damage to a tenant's property, your customers' goods legal liability insurance coverage will probably pay the claim. Just as important, it provides defense costs even if a claim is found to be groundless, false or fraudulent. It also includes coverage for damage done to customers' goods stored in the open, should you be found legally liable for that damage.
Customers' goods legal liability is not normally available in the standard insurance market and cannot normally be added to the standard business-owner's package policy. It is coverage available through specialty markets for self- storage insurance.
With the recession well behind us, most facility owners have finally gotten their deferred maintenance schedules under control. This new emphasis on routine maintenance is helping to contain losses in the area of our customers' goods. Aside from a complete reroofing of your facility, there are many new products available for sealing aging roofs. There are also companies that sell maintenance products, such as unit-door threshold seals, that provide cost-effective alternatives to more expensive repairs. And facility operators have kept busy implementing new ideas of their own to help contain losses, such as providing pallets in each storage locker. The pallets keep their customers' belongings a few inches off the floor, helping to keep them dry in the event of surface-water accumulation.
Security is also a major concern, and a number of vendors are in the business of providing various types of security equipment. A growing number of facilities are equipped with door alarms, computer-controlled entry gates and high-tech surveillance equipment. These products, accompanied by a good resident manager, help control crime.
Sad to say, the days are long gone when we can rent a unit to new tenants and turn our back on their activities. Many operators routinely photograph customers, and some even obtain fingerprints. This may seem a little drastic, but it has become a necessary practice in some areas. Some operators argue this type of intrusion will chase off customers; however, if it is done in a manner that expresses concern for their property, very few honest people will mind the extra care taken for their security. The customer it does chase off just might be a criminal, and lost revenue on a criminal is really money in the bank.
Another good crime-prevention procedure falls under the heading of follow-up marketing. For example, mailing a new customer a thank-you card the day he rents his unit is good marketing. It can also help uncover problems with mailing addresses sooner than if no contact was made until the customer became delinquent. You can include with the thank-you note referral cards for the customer's friends and neighbors. When a prospective tenant presents the referral card, the referring customer gets a gift or a discount. This creates good customer relations and helps reduce the likelihood of crime in your facility.
New construction and proper maintenance of our buildings, combined with hands-on management, attention to security and the prevention of crime, are creating safer and more secure places for customers to store their goods. Combine these efforts with good customer relations and we can all help to keep insurance costs for our industry at an affordable level.
Remember, no matter how large or small your self-storage facility may be, securing adequate coverage is essential for protecting your business and your peace of mind.
In addition to loss-of-income and extra-expense coverages, Universal Insurance Facilities Ltd. offers a complete package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, write P.O. Box 40079, Phoenix, AZ 85067-0079; phone 800.844.2101; fax 480.970.6240; e-mail email@example.com; www.vpico.com/universal.