By Keith McConnell
When it comes to insuring your self-storage operation, the choice of coverages can be overwhelming. Plus, theres more to protecting your investment than the coverages themselves. Property valuation, endorsements, addressing unique exposures or perils, policy terms and conditions, and other specialty programs are important as well. This list outlines the top 10 insurance coverages and considerations that are critical for the protection of your self-storage business.
No. 1Special Coverages: Customers Goods Legal Liability and Sale and Disposal Liability
Specialty coverages are designed specifically to address challenging insurance exposures that are unique to the self-storage industry. Customers 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, this could include damage to a tenants belongings caused by rain that entered the unit via an unrepaired hole in the roof.
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 as a result of a lien sale or other covered cause of loss.
No. 2Systems-Protection Coverage
One of the inevitable truths of running a business is equipment breaks. The good news is systems-protection coveragesometimes referred to as boiler and machinery coverage or equipment-breakdown coverageis widely available to address these types of losses. This coverage commonly includes items such as heating and cooling equipment, computer systems, surveillance equipment, electronic gates, phones, and other systems.
The total insured value of your self-storage business is a critical component of your insurance package. Its not uncommon for a business owner to request a reduction in his property value to save premium dollars. But leaving your property underinsured is counterintuitive to protecting your valuable investment. The recommended course of action is to insure your facility for its replacement-cost value. Taking that step now can save you from a crippling financial exposure in the event of a catastrophic loss.
No. 4Umbrella Liability
Lets face the facts: In todays litigious environment, the odds of a business owner being sued are uncomfortably high. Just as an umbrella protects you from the weather, an umbrella insurance policy provides additional protection over and above the liability section of your commercial-insurance coverage. In the event of a disastrous claim against you, that extra layer of coverage would provide protection beyond the liability limits of your other insurance policies.
No. 5Building Ordinance (Building Law)
Building-ordinance coverage offers protection in the event the 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 building codes. Without this coverage as part of your policy at an adequate limit, you face a potentially catastrophic financial exposure in the event of a triggering incident.
No. 6Business Income (Business Interruption)
Business-income coverage protects your operations 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 a significant factor in whether your business survives a catastrophic event.
No. 7Employee Dishonesty
Most employees are honest and work to help your business succeed. However, the ones who arent can cause business owners a lot of trouble. Employee-dishonesty coverage covers any loss of money or other business personal property belonging to the insured by dishonest or fraudulent acts of the operations employees. A common practice to mitigate this risk is to complete a criminal background check on new hires and an annual audit.
No. 8Cosmetic-Loss Limitation Endorsement
For self-storage business owners in hail-prone states, this endorsement may make the difference in whether a carrier is willing to offer a quote on a particular risk. A cosmetic-loss limitation endorsement offers business owners a premium credit for facilities in specific locations. The endorsement limits coverage for cosmetic hail damage to a metal roof. Hail damage to roll-up doors, siding, downspouts and gutters is not reduced on some policies. In addition, hail damage to the roof resulting in the failure of the metal roof covering to perform its intended function of keeping out the elements is not affected by this endorsement.
No. 9Cyber-Protection Coverages: Data Compromise and Identity Recovery
Businesses rely on computers for day-to-day operation, but that dependence can result in costly exposures in the event of cyber crime or data breaches. Data-compromise coverage helps self-storage businesses respond to data theft by providing services such as forensic IT reviews, legal assistance, credit monitoring, identity restoration services and notifications to affected individuals. The coverage responds to a wide range of data breaches including electronic theft (hacking), theft of computer systems, theft of data by employees, accidental publishing, procedural errors and fraud.
Identity-recovery coverage provides case-management service and expense reimbursement in the event of certain instances of identity theft. The key difference in these coverages is data-compromise coverage protects businesses and identity-recovery coverage protects individuals.
No. 10Tenant Insurance
It may seem unusual to cite tenant insurance in a list of commercial insurance considerations, but the truth is the importance of implementing a tenant-insurance program at self-storage facilities is difficult to overemphasize. This type of insurance has been proven to reduce the facility owners liability exposure in the event of tenant loss, which is a critical element of risk management.
Some tenant-insurance programs even include coverages that protect the facility in addition to those protecting tenants stored belongings. A tenant-insurance program may be strengthened even more by making insurance mandatory and requiring tenants to provide evidence of insurance.
Keep in mind these are just a few facets of your commercial-insurance coverage. Your insurance agent will be able to analyze your current coverage and make recommendations for changes to your policy that can protect your valuable investment from costly exposures.
Keith McConnell is vice president of business development for Phoenix-based MiniCo Insurance Agency LLC, which provides specialty programs for self-storage businesses in the United States and Canada. For more information call 800.528.1056; visit www.minico.com.