Protecting a Self-Storage Business From Property Loss and Liability Exposure: Insurance Coverage Limits and Exclusions

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By Kay Schaefer

Would you buy insurance for your self-storage operation that doesn’t protect your business? There are many different insurance products available for business owners, but they’re not all the same. Products differ in what they cover, what’s excluded, what optional coverages are available, etc. Here are some key items to help you a find a policy that protects your self-storage business from property loss and liability exposure.

The first and most important step for you as a self-storage owner is to share your business details with your insurance agent. By knowing your operation well, he can help you choose the most suitable product and insurance company from the many options available. Your agent is the expert who knows insurance companies, the products they offer, and how well they will service you if you have a claim. In other words, the better your agent knows your business, the better he can help you in protecting it.

Over time, your self-storage operation may change. You might add a new building or service, or outsource some services. You’ll need to inform your agent of these changes to ensure your insurance provides protection for these new exposures. In addition, your policy may need to be endorsed (changed) to add or modify coverage and limits. Even if the policy doesn’t need a change, discussing your operation with your agent will ensure your policy continues to provide the most suitable protection for your business.

For example, let's say you decide to add another building to your storage site. You have building materials on site during construction, and a new building at the end of the process. Your insurance policy probably provides a blanket limit covering all your owned structures and business personal property. However, because of the addition, your property limit is likely not adequate.

You and your insurance agent should consider what limit is needed to cover all your property, which might include buildings, materials under construction, security systems, maintenance equipment, lighting, fences, office equipment, manager’s apartment furnishings, signs, golf carts and any other business property.

Let's say the wind blows some shingles off your roof. Do you perform regular maintenance and inspections of your property? Most insurance policies will exclude wear and tear that causes deterioration. If you’ve performed inspections and maintenance, your insurance company probably won’t hesitate to pay for the damage. But if your roof is simply worn out, this could be your responsibility to repair.

Policy Exclusions

Every insurance policy has exclusions. It’s important to know what exclusions apply to your property under your insurance contract and discuss any you’re concerned about with your agent. For example, most package policies providing property and liability don’t cover loss to your property due to earthquake, flood or pollution.

However, an optional coverage or another policy might be available for purchase. Discuss with your agent whether you should obtain insurance coverage for these exposures or “self-insure,” meaning you’ll bear the cost of any loss.

Loss of Income

If you experience a significant loss, such as a fire, you could also experience a loss of income due to your inability to rent units or resume normal operation. Review your policy to ensure your limit for loss of income is sufficient for your business. Here are two important questions to ask: How long will it take to get permits and rebuild, and what will you do if tenants must vacate the undamaged portion of the building while it’s repaired?

In many areas, there are ordinances or laws that may delay or add costs to your repair or rebuild. A partial loss to a building could even require the teardown of the remainder of the building, or the addition of a fire-sprinkler system that wasn’t previously part of the building. How will your insurance respond, and what will you be responsible for paying? Again, your agent will be a great resource to help you with these questions.

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