The Benefits of Self-Storage Tenant Insurance

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Limited financial liability. Another option is for you to act as a landlord by accepting or retaining some limited responsibility in your rental agreement. We are not talking about offering insurance to your customer. The concept is for you to accept or retain some responsibility as a service provider, and permit your customers some limited compensation for their loss as part of your rental agreement.

Your agreement probably contains a non-liability provision, and your rental charge has been set in contemplation that you will not have to respond to property damage issues raised by your customers. A number of self-storage operators are currently backing away from the typical lease, eliminating any responsibility by offering customers the option of having the operator accept or retain some limited financial responsibility for damage to property in exchange for a modest increase in rent. The increased rent is charged to fund the payment to customers for damage to stored property.

When your roof leaks or a storage unit is burglarized, even the most reasonable tenants will tend to believe that you have failed to provide them with the service in which you have been paid. Operators who choose to retain or accept limited financial liability for damage to customers’ property through their rental agreements have an option of purchasing insurance to transfer part or all of this contractual liability to an insurance company.

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While the tenant insurance options discussed in the preceding paragraphs will often work to avoid tenant disputes and litigation or even provide an additional layer of legal insulation to the self-storage operator, the alternative of accepting some limited responsibility to resolve claims for property damage will go further in resolving the customers’ expectations of the service in which you have charged them.

The concept of the storage operator’s ability to accept or retain responsibility for stored property has also been challenged in the regulatory arena. Concerns are being brought to regulators’ attention by an insurance provider that storage operators are crossing into the business of insurance.

However, as of the writing of this article, states that have thoroughly reviewed and taken a firm position on the issue, with the notable exceptions of New Jersey and Texas, have come to the opinion that an operator may either accept or retain limited responsibility for stored property within the context of their rental agreements and may charge for this assumed or retained financial liability. The concept remains an unresolved issue in some states including Connecticut, Kentucky and Pennsylvania.

Let’s return to the original premise of this article: most self-storage operators do not offer their customers a tenant insurance option or a lease that retains or assumes some responsibility for damage to stored property, and most of those operators who do not claim it is too much trouble to do so. This is a matter of customer service, of meeting customer expectations, and avoiding problems arising from the inevitable property loss.

The optional solutions are simple to implement and will either cost you little or nothing, and could increase your revenue stream. If you are one of the majority of operators who do not currently offer your customers some way to recoup for their losses to property stored in your facility, put down the magazine, pick up the phone and call your insurance provider.

Scott Lancaster is the regulatory compliance officer for Deans & Homer. He started his insurance career in 1976 as a licensed insurance agent and broker in California. Deans & Homer has provided insurance products designed to respond to the unique risks of the self-storage industry since 1974. For more information, call 800.847.9999; visit www.self-storage-insurance.com.

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