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A Self-Storage Manager Touts the Protection Benefits of Tenant Insurance

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A guest installment by Stephanie Tharpe, District Manager, A Plus Storage of Tennessee LLC

I was a big naysayer when it came to self-storage tenant insurance. For years, I thought it was a waste of time. I would place a piece of paper in front of a tenant and expect him to decline. What changed my mind? It was actually a very personal matter.

Almost two years ago, my husband and I were renting a home that was burglarized. Not only was it scary, but we never found out who did it. And we did not have renters’ insurance. I had talked about it, even gotten pricing, but it fell through the cracks and I never purchased it. It was not my landlord’s responsibility to cover our belongings, so we took a $5,000 loss. I immediately purchased renters’ insurance, which got me thinking ...

As a district manager for 12 self-storage properties, I get all the crazy phone calls from tenants who are angry and want compensation from us because they believe we are responsible for everything. Even though it’s explained in the rental agreement, tenants only hear what they want to hear and seldom read their lease. Our managers are trained to explain the rental agreements but, again, I’ve had several conversations with customers who did not understand their responsibilities. Anything can happen. A break in, a tornado—the list goes on and on.

Homeowners’ insurance covers storage, sometimes. I’ve had customers call their agents right in front of me only to find out they’re not covered. Also keep in mind, the deductibles are high and if the insurance company feels the damage is due to negligence of the property owner, it will not cover it. I’ve actually had an agent come out for a claim and tell me this to my face (ie: the water leaking in the unit was the culprit).

We can protect ourselves by stating, “You were offered insurance, you declined, and here is the document you signed.” And be done with it. However, I find it is so much better for customer relations to hand them the brochure with the phone number and say, “That is why you have insurance. Just call and they will help you.” Have we had claims? Yes, we have. Were they handled professionally? Absolutely.

There are three main reasons to offer a pay-with-rent tenant-insurance program. First, in case of an unfortunate loss, I want my tenant to have quick access to financial compensation. I know my lease states my facility and owners are not responsible for our occupants’ stored contents, but that will not stop a very disgruntled tenant from taking my owner to court if something happened and he was not insured.

Which brings me to No. 2: Tenant insurance helps protect my owner from our tenants with an extra wall of protection. Whether there is one claim or 20 in an unfortunate incident, my owner doesn't have to reach into his pocket to compensate the tenant(s) as a "goodwill" move.

Finally, the revenue that can be generated from tenant insurance is all found money. The tenant-insurance tool (when properly put into play) in most cases generates more revenue than truck rentals, boxes, locks and packing supplies. For example, if 400 units are at 85 percent occupied, in five months you could have 60 percent of your tenants on the insurance you offer. That equals. $735 per month to the facility and $126,000 increased property value to the owner based on a 7 percent capitalization rate.

These are the facts and I have proof. I’ve watched managers at all 12 of our facilities be successful with enrolling tenants with insurance. We do not believe in or practice a mandatory program, either. It’s very obvious and makes great business sense to put this into play properly.

In just six months, our insurance partner helped us enroll more than 1,750 tenants in our insurance program. This is a lot of "found money" to us and extra protection for all involved. We accomplished this with nothing ever spent out of pocket. Our insurance partner even paid for our limited license on all 12 stores.

Our managers average enrolling eight out of 10 new tenants in the insurance program by assuming the sale properly. When you have these results across the board, the time you take to enroll the tenant becomes irrelevant. It takes us under a minute. We did reach out to our existing tenants in the six-month timeframe and enrolled approximately half of them (not making it mandatory). Actually, our insurance partner did all that on our behalf. Again, we did not have to any out-of-pocket expenses or spend extra time to doing this on our own.

After one year, we have phenomenal income, protection for everyone and all my managers received a raise. The lowest-performing store (only because its the smallest) sold more than $9,000 in insurance policies in 2013. Our highest performer sold more than $26,000. We pay 20 percent commission. In my humble opinion, offering self-storage insurance really is something to seriously consider.

Stephanie Tharpe is the district manager for A Plus Storage of Tennessee LLC, where she manages a portfolio of 12 facilities in Nashville, Tenn., and oversees the company's branding and social media. She has 16 years of self-storage experience. In 2012, she was named Manager of the Year by the Tennessee Self Storage Association. Ms. Tharpe will also be a featured speaker at the Inside Self-Storage World Expo, March 31-April 1, in Las Vegas. Her seminar, “Self-Storage Manager Motivation and Retention,” is on March 31 at 10 a.m. in Champagne 2. To reach her, visit www.aplustorage.com.  

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