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Insurance Made Easy: Vital Coverages to Protect Your Self-Storage Operation

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By Mike Schofield

Sitting down with your insurance agent to discuss the policy for your self-storage business can be an overwhelming prospect. There are many types of coverages, and the unfamiliar terminology and legalese can be confusing. With that in mind, here’s some simple insight to the property and liability coverages that are vital for the protection of your operation.

Customer-Goods Legal Liability

Your self-storage insurance policy should include specialty coverages that specifically address exposures unique to self-storage operations. Customer-goods legal liability provides coverage against loss or damage to customers’ personal property for which the self-storage business may be legally liable. For example, it would cover damage to a tenant’s belongings caused by rain that entered the unit via an unrepaired hole in the roof.

Sale and Disposal Liability

Sale and disposal liability coverage protects self-storage operations against liability claims by customers for loss to their stored property due to the sale, removal, or disposal of the property. For example, this might be the result of a lien sale or other covered cause of loss.

Umbrella Liability

Unfortunately, business owners in most industries face the prospect of lawsuits. Self-storage owners are particularly vulnerable due to the involvement of tenants and their stored belongings. Umbrella liability coverage provides an additional layer of protection over and above the liability section of your commercial insurance coverage. It’s critical in the event of a disastrous claim against you that would exceed the liability limits of your other policies.

Business Income

Business-income coverage protects your storage operation’s income in the event of a loss requiring reconstruction. A typical policy provides regular business income and extra expenses incurred for 12 to 15 months, plus additional time following reconstruction while storage spaces are being re-rented. Some policies offer options to extend the coverage for 18 to 24 months. This coverage can be the deciding factor on whether your business survives a catastrophic event.

Building Ordinance

Building-ordinance coverage offers protection if structures at your facility are damaged to the extent that local building codes or ordinances require the remaining structure be demolished and rebuilt to meet current codes. Without this coverage at an adequate limit, you face a potentially catastrophic financial exposure in the event of a triggering incident.

Wind/Hail Deductible Buy-Back

Percentage deductibles have been implemented by insurance carriers in geographic areas prone to catastrophic wind and hail claims. In fact, deductibles of up to 5 percent are becoming increasingly common in the most challenging locations. Not only does this practice mean a facility owner may be faced with large out-of-pocket expense, it may violate the terms of the mortgage agreement. This may place a ceiling on the deductible. A standalone wind/hail deductible buy-back program enables the deductible to be lowered to a certain percentage or specific dollar amount.

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