Keeping Your Business Insurance Costs in Check

By David Wilhite

Theself-storage industry has undergone tremendous changes over the past 20 years,evolving from a core group of small "mom and pop" operations to alarge, powerful organization of professional business people. The rapid growthof the industry has further created a variety of challenging new issues, many ofwhich we are just coming to terms with.

When the self-storage industry was young, so were its buildings. Facilityowners had secure new roofs that did not leak, factory-fresh doors that properlysealed their units, and less crime at their facilities. This environment wasvery attractive to insurance companies, several of which developed productsspecifically for the industry. These specialty insurers provided better coveragethan what was generally available at the time, and many offered significantlyreduced premiums for substantial savings.

While the self-storage industry was maturing during the late '80s, so wereits buildings. Due to various challenges of the time--primarily therecession--maintenance was deferred in many facilities. In addition, thecriminal element discovered self-storage facilities were an ideal place toconduct their activities. These developments caused insurance costs to rise andclaims activity to increase dramatically in certain areas, such as customers'goods legal liability.

Customers' goods legal liability is an important coverage specific to ourindustry. The basic premise of self-storage is that we act as a landlords, notwarehousemen; we never take possession of our customers' goods. Therefore, weare not responsible for those goods since we are simply renting space. However,there are certain situations that can create legal liability on your part fordamage to your customers' goods. For example, by providing a building to storegoods, we represent protection against the elements. If a customer's goods aredamaged by water, he may feel you were somehow negligent in honoring thatrepresentation.

If you are found legally liable for damage to a tenant's property, yourcustomers' goods legal liability insurance coverage will probably pay the claim.Just as important, it provides defense costs even if a claim is found to begroundless, false or fraudulent. It also includes coverage for damage done tocustomers' goods stored in the open, should you be found legally liable for thatdamage.

Customers' goods legal liability is not normally available in the standardinsurance market and cannot normally be added to the standard business-owner'spackage policy. It is coverage available through specialty markets for self-storage insurance.

With the recession well behind us, most facility owners have finally gottentheir deferred maintenance schedules under control. This new emphasis on routinemaintenance is helping to contain losses in the area of our customers' goods.Aside from a complete reroofing of your facility, there are many new productsavailable for sealing aging roofs. There are also companies that sellmaintenance products, such as unit-door threshold seals, that providecost-effective alternatives to more expensive repairs. And facility operatorshave kept busy implementing new ideas of their own to help contain losses, suchas 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 ofsurface-water accumulation.

Security is also a major concern, and a number of vendors are in the businessof providing various types of security equipment. A growing number of facilitiesare equipped with door alarms, computer-controlled entry gates and high-techsurveillance 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 andturn our back on their activities. Many operators routinely photographcustomers, and some even obtain fingerprints. This may seem a little drastic,but it has become a necessary practice in some areas. Some operators argue thistype of intrusion will chase off customers; however, if it is done in a mannerthat expresses concern for their property, very few honest people will mind theextra care taken for their security. The customer it does chase off just mightbe 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-upmarketing. For example, mailing a new customer a thank-you card the day he rentshis unit is good marketing. It can also help uncover problems with mailingaddresses sooner than if no contact was made until the customer becamedelinquent. You can include with the thank-you note referral cards for thecustomer's friends and neighbors. When a prospective tenant presents thereferral card, the referring customer gets a gift or a discount. This createsgood customer relations and helps reduce the likelihood of crime in yourfacility.

New construction and proper maintenance of our buildings, combined withhands-on management, attention to security and the prevention of crime, arecreating safer and more secure places for customers to store their goods.Combine these efforts with good customer relations and we can all help to keepinsurance 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 yourpeace of mind.

In addition to loss-of-income and extra-expense coverages, UniversalInsurance Facilities Ltd. offers a complete package of coverages specificallydesigned 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, AZ85067-0079; phone 800.844.2101; fax 480.970.6240; e-mail [email protected];www.vpico.com/universal.