This site is part of the Global Exhibitions Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 3099067.

Informa

A Pair of Protective Programs

J.R. Lewinson Comments
Posted in Articles, Insurance
Print
We’re well into the first quarter of 2006, and I’m willing to bet that some of your New Year’s resolutions disappeared faster than the holiday leftovers. It happens to all of us—we make big goals to start fresh in January, and then life goes back to its hectic pace. Grand plans for improvement get lost in the shuffle.

However, if some of your resolutions involve risk management at your self-storage facility, consider these two important trends before losing focus. First, costly litigation involving self-storage businesses continues to rise annually. Second, the government has expressed increased concern about criminal activity at storage sites. Since 9/11, the feds have increasingly scrutinized this industry; and regulation intended to minimize terrorist and other illegal activity could put a significant burden on storage operators.

What you can do? Reduce the risk of litigation and illegal activity on your premises. It may sound complicated, but there are two programs that address these issues and make the job a lot easier.

Tenant Insurance

Offering a quality tenant-insurance program at your facility provides a couple of important benefits: it minimizes potential liability and improves customer service. Tenant insurance is optional coverage customers can purchase to protect their stored goods. Available from several companies, policies commonly cover losses from lightning, wind, hail, water damage (excluding flood damage), fire, smoke, earthquake, building collapse, burglary, explosion, vandalism and riot.

From the perspective of a facility owner or operator, liability protection is essential in cases where customer property is lost or damaged. Comprehensive rental agreements will include a statement indicating that facilities are not, by definition, responsible for such losses. However, in the event a claim is made against you, your chances of a quick and favorable resolution are increased if you can demonstrate tenant insurance was offered.

An easy method of documentation is to use the form included in customer brochures furnished by most insurance companies. Having customers sign the provided waiver proves you fulfilled your obligation to alert them about the need and availability of tenant insurance.

The other reason to offer insurance is customers need it, though they may not fully understand why. Tenants with homeowners’ insurance policies often don’t know if their coverage extends to items stored outside the residence. Going over insurance issues during the leasing process gives managers a chance to explain the need for optional coverage—and is good customer service.

Pay-With-Rent vs. Mail-In

There are two main types of tenant-insurance programs: mail-in and pay-with-rent. The facility’s role with mail-in programs (also known as over-the-counter programs) is simply to present tenants with a brochure describing insurance coverage. Those wishing to buy it complete the enclosed application and mail it directly to the insurance company. The tenant then deals directly with the provider for premium payments, claims and other issues.

Pay-with-rent programs require the storage operator to become more involved in policy administration. Tenants pay premiums with their monthly rent. The facility then forwards the correct amount to the insurance provider in return for a nominal administrative fee or commission (where state legislation allows). To simplify the accounting, a number of software companies have developed insurance applications with pay-with-rent recordkeeping functions for self-storage.

Implementing any tenant-insurance program will bolster your risk-management goals, but a pay-with-rent program takes that protection a step further. The benefit comes in the high level of tenant participation: an average of 10 to 35 percent. That means up to one-third of tenants purchase coverage for their stored goods. Mail-in programs don’t come close to this kind of popularity.

The bottom line is clear: The greater the number of participants, the less liability exposure for your business. In addition, most insurance providers offer free marketing materials and no monthly quotas. For customers, pay-with-rent means affordable coverage and convenient billing.

Tenant Screening

Tenant screening is the latest weapon in the fight against crime. Offered by a small number of vendors, it allows storage operators to identify questionable customers before granting use and access to their property. Screening is a healthy process for facilities and the communities they serve. Tenants will appreciate your attempt to anticipate and prevent security problems. Better yet, improving the makeup of your customer base through criminal and credit background screenings can enhance profit.

Quality of research is the key any screening program. Criminal background checks are the centerpiece, but it’s important to know what information will be provided and how it’s being collected. Basic criminal-record searches may be conducted through county courthouse records or a nationwide database. While courthouse searches tend to be more detailed, they are time-consuming and geographically limited. By contract, database searches often rely on Department of Corrections records and other sources. These provide access to data from a wide geographical range at an attractive price and with instant results.

Specialized background searches are also available. Sex-offender data is compiled by each state under Megan’s Law and may be searched as part of a screening. Fraud searches help verify identities and usually include checks for Social Security fraud and related activities. Federal database searches may help identify serious interstate and federal offenses, including drug-related crimes and potential terrorist activity.

Credit checks are an additional element of tenant screening. Credit reports can be used to identify applicants with a long history of unpaid debts, liens and bankruptcies. Credit scoring can be used to choose tenants who are the most likely to make timely and consistent payments.

Affordable Risk Management

For many self-storage businesses, cost is the primary consideration in deciding on new risk-management initiatives. Tenant-insurance programs generally cost nothing to offer—brochures and marketing materials are provided for free. A pay-with-rent program requires a minimal amount of bookkeeping, but the cost is typically offset by increased liability protection. Some tenant-screening companies offer their services for less than $10 per applicant. You can find background checks for as little as $3 each and enhanced screening solutions for about $6.

When you weigh the minimal costs of these two programs against the risk of renting to an uninsured or unscreened applicant, the benefits are obvious. The important thing is to stay focused on adding that comfortable layer of extra security.

J.R. Lewinson is manager of Customer Storage Insurance for Phoenix-based MiniCo Inc., which has more than 10 years of experience in underwriting commercial and tenant insurance for the self-storage industry. For more information, call 800.528.1056; e-mail jlewinson@minico.com ; visit www.minico.com .

Comments
comments powered by Disqus