The Benefits of Self-Storage Tenant Insurance

Scott Lancaster Comments
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This article should be a cost-effective wake-up call for approximately three out of four operators. According to a 2008 survey, 73 percent of self-storage operators do not offer a storage insurance option to their tenants. Why? This same survey suggests that 52 percent of the operators not offering insurance to address property damage or theft claims believe it is too much trouble.

The truth is you can avoid trouble and maintain good customer relations by offering your customers an insurance option, or by retaining some limited financial responsibility and responding to your customers in a positive manner when their property is damaged.

Understanding Liability

The self-storage industry has worked hard to develop a strong wall of legal insulation for the self-storage operator. Statutes in most states now recognize the limited liability of the operator for loss or damage to tenants’ stored property. Many states laws are further enhanced by a provision the operator may include in the rental agreement that eliminates their legal liability for negligently caused damage to stored property.

These protections work well in theory but are often challenged in practice. Your agreement may be clear that you take no responsibility for your customers’ stored property, but when the agreement conflicts with what your customer feels to be fair and reasonable after a loss, an argument and a legal challenge may follow.

Insurance for tenants’ stored property was developed almost 30 years ago at the request of self-storage operators as a way to deal with liability issues. When your customers have a way of being compensated for their loss or damage, their motivation to argue, complain and sue is often eliminated. Rental car companies and phone service providers understand this, and so should you.

There are many ways for you to provide this service to your customer. Let’s look at your options.

Brochure applications. The oldest and perhaps simplest option is to provide your customers a brochure that will allow them to purchase insurance on their stored property through a postage-paid mail-in application included in the brochure.

A more recent but equally simple evolution of the mail-in option is referral to the website of an insurance provider that allows your customer to purchase insurance for stored property online. Depending upon the insurance provider you select, you may be asked to pay a nominal fee for the pre-printed materials you give to your customers or it could be free.

Pay-with-rent. Another tenant insurance program allows you to offer your customers the option of purchasing insurance and paying for their coverage along with their monthly rent. This pay-with-rent insurance option requires you to collect and account for the premiums with an insurance-tracking module in your self-storage management software program, which is now available in most self-storage management software. Also, a higher percentage of customers will purchase this option over those who are given a mail-in application or directed to a website.

An additional benefit is insurance providers will pay you a commission or administrative fee for this service. However, you may be required to obtain an insurance license to provide this service. A number of states, including Arizona, California, Florida, Illinois, New Jersey, North Carolina and Texas, have enacted limited licensure laws that specifically recognize this activity and require the facility or the individual manager to obtain a license. In other states, similar laws are either pending or the issue has not yet been reviewed and considered.

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