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Self-Storage Property Damage: Policy Must-Haves and Prevention Advice

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By Lauren Nicholson

Like any brick-and-mortar business, a self-storage facility is vulnerable to property damage. Whether unforeseen events are caused by natural or man-made forces, it’s important your business is protected through a quality insurance policy.

Commercial-property insurance coverage protects your owned property and everything contained within. Most policies will cover you on a “replacement-cost” basis up to a stated limit. This includes the building contents such as office furniture and equipment, computers, security monitors, and retail inventory. Replacement-cost coverage is preferred because it doesn’t factor in depreciation over time. If there’s a claim, the policy would reimburse you for the cost to replace the building or items at today’s cost.

Additional coverages that should be listed on the property portion of your business insurance policy are equipment breakdown and utility services. Equipment breakdown is designed to protect you against damages resulting from the electrical or mechanical breakdown of owned systems or equipment. It’s essential, especially if your facility has a climate-control or sprinkler system, or a boiler.

Coverage for utility services is also vital, particularly if your facility is in a severe weather region. Note: There are limits on the circumstances in which insurance will pay for loss due to power outage, so you must have coverage for off-premises power failure.

Business Interruption

If you experience a tangible property loss, your self-storage facility may be affected in other ways. For example, damage to a main building could cause a full or partial closure of the business. For this reason, it’s imperative to have business-income or business-interruption insurance. The coverage should be at sufficient limits in accordance with your gross revenue, so you’re covered for the cost to relocate the office if necessary and operate the business as usual. It’s vital for employee remuneration and to receive reimbursement for lost revenue during the inoperable period.

This coverage typically has a maximum timeframe, such as 12 months, as well as a set time deductible. For example, it may not kick in until 72 hours have passed.

If this coverage is listed on your policy as “ALS” (actual loss sustained), you have the most comprehensive coverage, since it’s not based on an established limit. Rather, it’s designed to indemnify you for the actual lost revenue resulting from the claim.

Prevention Is Key

Identifying potential hazards before a tangible property loss occurs is key to prevention. Here are some of the most common causes of building-damage claims and how to avoid them:

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