By Colleen Wood
Those of us who have been in the self-storage industry for any length of time have no doubt read numerous articles about tenant insurance, sat through multiple insurance-sales presentations, and probably dealt with more than a few distressed customers wanting to file a claim. Despite all that overexposure, most facility managers would probably still agree with an industry standard to require tenant-insurance coverage.
Managers know first-hand that if items are important enough to store, they’re important enough to insure. It makes no sense (or cents) for tenants to pay monthly storage fees for goods they aren’t willing to protect. Below are some strategies to help you get customers on board you’re your tenant-insurance program, which safeguards both their interests and your business.
A Common Tale
At some point in their careers, most self-storage managers will encounter a residential customer who says, “I already have more homeowners/renters insurance than I need; I certainly don’t need or want any more.” This position is often echoed by commercial-account representatives as well: “My company insures all of our products. We have much better companywide coverage than you can offer.”
That “coverage” satisfies the insurance requirement from move-in day all the way to when the “thousand-year flood” (South Carolina), wildfires (Arizona and California) or tornadoes (Oklahoma) hit. Once an incident occurs, the residential customer with the $2,500 deductible on his homeowners’ policy—the same policy that’s supposed to cover the $1,000 worth of household goods in his storage unit—finally does the math and realizes the limitations of his policy.
When he contacts his insurance agent, he may also find that his policy doesn’t cover items located anywhere other than the primary property listed on the policy, despite the verbal assurances he received from the agent prior to moving belongings into the unit. In this example, the tenant will probably be instructed to file a claim against the storage facility where his goods are located.
Your reminder that he made a conscious choice not to purchase tenant insurance at move-in isn’t going to appease him. He’ll still expect your facility’s insurance to pay for damages to his items—now “heirlooms”—caused by the flood, smoke, breakage or what have you. He won’t want to hear your reminder that the lease stipulates that it is the tenant’s responsibility to provide adequate insurance coverage on stored belongings. He certainly won’t want to be reminded of the liability limitations spelled out in the lease (the ones advising him the facility doesn’t cover his stored property). In the blink of a hurricane’s eye, you have a very dissatisfied customer standing in front of you, more often than not threatening to post unfavorable remarks about your lousy customer service on social media.
Being “proactive” to prevent incidents like these isn’t just a buzz word; it’s the best way to handle insurance situations before they become a problem. Make tenant insurance a requirement. While this sounds simple, how do you handle customers like the above, who thinks he already has the problem covered?
Warn of Policy Shortcomings
Remind customers who deflect the requirement with their own homeowners or renters insurance policy that natural disasters do occur, and cite examples from your state or region. Explain that many of these homeowners and renters policies don’t cover items located anywhere other than the primary insured residence. Even a rider that accommodates items stored off site still requires the policy holder to meet the primary deductible requirements.
You can also point out that the deductible on homeowners or renters insurance is often higher than the value of the stored items, making the policy worthless for the items that will be stored at your facility. Note as well that claims on homeowners or renters insurance frequently result in premium rate increases.
Make Insurance Non-Negotiable
Make the purchase of tenant insurance a non-negotiable part of the lease. How? Include it in the price quote for the unit. Some operators already do this with cylinder locks and other items. For example, “That size unit costs $100 per month and comes with …” You fill in the blank with whatever amenities apply: free use of the moving truck, a unit alarm, unit lights, a lock, $2,000 worth of insurance, etc.
The follow-up question from the customer is usually, “Well, what if I have my own lock and insurance? How much is it then?” The answer is $100 per month. The cost of the unit is $100 per month, with or without the extras you include for the convenience of your customers.
If the customer wants to argue the point, use the analogy of buying a shirt. The shirt comes with buttons and sleeves. If you want that particular shirt, then you buy it with buttons and sleeves. Even if you have a whole jar full of buttons at home, and you’re perfectly OK with sleeveless garments, the shirt still costs the same price, and it comes with buttons and sleeves. The same applies to the unit. It costs $100 whether or not the customer wants the unit light, lock, use of the truck or insurance.
Allow a Caveat/Addendum
If a mandatory tenant-insurance requirement doesn’t appeal to you or you think your customer base won’t respond well, then allow tenants to use their homeowners or renters insurance, but include a caveat or addendum to the lease agreement. When offering the option to use homeowners or renters insurance, require customers provide you with proof of insurance. What you want is a copy of the declarations page, which generally stipulates what is and isn’t covered under the policy.
In addition, require customers sign a separate statement declining the facility-sponsored tenant insurance. The form should include the insurance offer and a place for the customer to select or decline the proffered insurance. It should also include a section where the customer further notes that he understands his refusal to purchase additional insurance means he agrees to assume all liability for any and all damages to his property.
Offer Special Deals
Unless you’ve had a prior conversation with your prospective tenant and advised him to bring a copy of his insurance policy with him, he likely won’t have it on his person when he comes to sign the lease. To alleviate customer frustration and give him time to provide the necessary document, offer to “comp” the first month’s insurance premium so he’s immediately covered. In short, you’ll give him a “free” month of insurance by deducting the amount of the insurance premium from his first month’s rent. Not only does this give the customer time to speak to his insurance agent about his policy coverage and provide you with proof, it creates goodwill.
Please note: You can’t “waive” the cost of insurance by crediting the insurance premium itself. You deduct the amount of the insurance from the first month’s rent. Explain the mechanics of the credit to rent vs. premium to the customer. Remind him the cost will be added to his second month’s rent unless he produces the required declarations page from his personal policy.
In many cases, the customer will simply elect to continue with the facility’s tenant insurance because it’s easier. If he doesn’t, then you’ll still have a copy of his insurance policy for your files, along with the addendum declining the insurance you offered. Either way, your self-storage facility is “covered.”
Colleen Wood has 15 years of experience in self-storage management. She’s currently an administrative assistant for Columbia, S.C.-based Southeast Management Co., which offers full-service management and consulting services to self-storage operators. For more information, visit www.southeastmanagementcompany.com.