By Keith McConnell
The economic climate puts pressure on self-storage business owners to seek additional sources of revenue, and a tenant-insurance program can be one of them. But before you choose a program based solely on dollar signs, there are a few important things you would be wise to consider.
There are generally two types of tenant-insurance programs: mail-in and pay-with-rent. Mail-in programs require very little hands-on work for the facility operator and don't include an administrative fee. Pay-with-rent programs require facility staff to perform certain tasks and pay facilities an administrative fee.
Customers who choose pay-with-rent tenant insurance remit their premiums along with their rental fee each month. The facility is responsible for recordkeeping. Once a month, the operator will submit a report to the insurance provider and send the collected premiums minus the administrative fee due to the storage business. Some states require that facilities offering a pay-with-rent program obtain a limited license.
Understanding the Benefits
The range of facility compensation among pay-with-rent tenant-insurance programs can be diverse. Some providers offer a flat rate per policy, others include a percentage of total premium, and some base the administrative fee on a combination of factors. Compensation may be tied to the participation rate or the number of policies purchased each month, with administrative fees paid on a sliding scale. In this scenario, the highest level of compensation would be reserved for the highest participation numbers.
Participation rates are an important consideration for more than just calculating the administrative fee. Whatever program you choose, you’ll earn more revenue if more of your customers elect to purchase the insurance.
Administrative fees are earned every month the customer purchases insurance. For example, a $4 per policy administrative fee adds up to $48 in additional revenue for each tenant who participates for a full year. So for every 100 insured tenants at your facility throughout the year, that’s a potential $4,800 in added revenue. With that in mind, it’s critical that you examine the coverages offered and premium prices to determine if the product is something your customers would perceive as valuable and worth the expense.
Keep in mind that not all programs offer the same coverages, deductibles or limits. There are unique benefits available such as replacement-cost coverage, rodent and vermin damage, and zero-dollar deductibles. Some programs even offer benefits for the facility owner such as coverage in the event of a fire originating in an insured tenant’s rented unit. You should also determine if the program is an insurance product or a warranty, and make sure you understand the difference.
Choosing an Insurance Partner
To find the best partner, interview prospective tenant-insurance providers and find out how they’re willing to work with you to help increase tenant participation. Do they offer customized periodic training for your managers? Will they send you marketing materials to display in the office and around the property? Will they help you create letters or e-mails to send to your tenants?