Self-Storage Insurance Facility Value and Replacement-Cost Calculations

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While this may seem like a way to save some money, it’s shortsighted. Insurance should be purchased for small claims and catastrophic losses. The worst time to find out you’re underinsured is when your entire facility has been devastated by a tornado and you don’t have enough coverage to rebuild. The small savings in premium you experience will be paltry compared to the expense you’d incur replace all or part of your facility.

Discuss valuation techniques with your insurance agent. This should be part of a regular review of your insurance portfolio. Rebuilding is typically the most cost-effective way to recover from a loss.  However, some self-storage owners might choose not to rebuild. If this is the case, actual cash value might be the better way to address the valuation. This is normally defined as replacement cost minus depreciation. This needs to be considered when purchasing your insurance, not at the time of loss; when an insurance company subtracts depreciation, there can be a huge reduction in value.

Ask for an Appraisal

If you drastically disagree with the replacement-cost value used, one option is to request a replacement-cost appraisal from an appraiser licensed in your state, one familiar with developing such estimates. There’s a fee associated with this, and certainly some time involved in gathering the documentation and showing the appraiser around your property. In the end, you might spend more on the appraisal fee than the reduction in premium is worth. Also, make sure your insurance carrier will accept the appraisal before you move forward.

The cost of insurance is a critical element in your expense budget. Work with an agent who can guide you through the process and place your insurance with a carrier that specializes in self-storage.

Randy Tipton is the owner of Universal Insurance Facilities Ltd., which has provided specialized insurance coverage to the self-storage industry for more than 12 years. Universal has clients in 49 states, with a commitment to providing A-plus service; fast, fair claims handling at an affordable premium; and agents trained specifically in self-storage. For more information, call 800.844.2101; e-mail randyt@univins.com; visit www.universalinsuranceltd.com .

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