By Mel Holsinger
A new trend is being discussed all over the self-storage industry: Mandating that customers have tenant insurance as a condition to storing. Following is a discussion of the pros and cons so you can make the right decision for your business.
For years, self-storage operators have been blessed with laws allowing them to require that customers self-insure through their homeowners’ or renters’ insurance policies. Facility operators are not required to insure tenants’ possessions, as they do not take care, custody or control of stored goods.
But over the past several years, there have been many lawsuits in which a facility operator was ordered to pay for damages to a customer’s unit contents. Other facility operators have offered compensation to avoid a legal battle or bad public relations. In most cases, however, the cost to replace or repair damaged belongings has been the burden of the customer.
A few decades ago, several insurance companies saw an opportunity and began offering customers’ goods insurance, more commonly called tenant insurance. For a small amount, usually $8 to $20 per month, a customer can purchase this coverage from the self-storage operator or directly from the policy provider. It varies, but most policies cover between $2,000 and $10,000 worth of property.
This facet of the industry has grown greatly in recent years as operators recognize the value of tenant insurance. Not only does it protect customers, it can potentially generate revenue for the storage business.
Make It Mandatory
When it comes to leasing a self-storage unit, there’s a lot of information to cover with tenants, including facility rules, late fees and more. All too often, facility managers brush over the topic of insurance during the rental process, hoping tenants will read the pamphlet they’re given or ask questions about the program later.
A good self-storage manager will emphasize his facility’s tenant-insurance program with every new customer. Most tenants will assume—incorrectly, of course—that the facility will compensate them if a loss occurs due to a fire, tornado or even a burglary. When they realize this is not the case, their emotions range from anger to disappointment, and the manager will be the target of their words and actions. For the tenants who are covered, either through their own policy or tenant insurance, the loss will be traumatic but not as severe.