By Stephanie Tharpe

Tenant insurance has become a hot topic in the self-storage industry. The practice of operators offering coverage to tenants has become so commonplace that some customers who inquire about our rental rates want to know if our prices include insurance. Most of the industry real estate investment trusts now require customers to have coverage, and several operators I’ve spoken to also require tenants to protect their goods.

It’s important for facility managers to understand how tenant insurance protects customers as well as how it can benefit his business. First, take a close look at your rental agreement to ensure it specifies your facility isn’t responsible for damage to customer goods. Common language typically reads something like, “The owner and the owner's employees and agents shall not be responsible or liable for … including but not limited to, theft, mysterious disappearance, vandalism, fire, smoke, water, flood, hurricanes, rain, tornadoes, explosions, rodents, insects, acts of God, or the active or passive acts or omissions or negligence of the owner, the owner's agents or employees.” That sounds all well and good, but let’s face it: We can’t always write ourselves out of liability.

At my company, we’ve offered tenant insurance to customers for nearly two years, and the results have been amazing. While the claims have been few, those that were filed were handled quickly and to the satisfaction of tenants. Let’s take a closer look at how offering a program can be beneficial to customers and your business, as well as how to stimulate buy-in.

Primary Benefits

If an unfortunate loss occurs, I want my tenants to have quick access to financial compensation. Even though our lease states we’re not responsible for damage to tenant property, this won’t stop disgruntled tenants from taking us to court if an incident occurs and they aren’t insured. What if the facility catches fire or is wiped out by a storm, or a truck smashes into a building? Facility managers often become friendly with customers, and naturally, tenants will want you to do something when there’s damage to personal property. Tenant insurance removes the responsibility from managers to “fix it.”

Offering tenant insurance also provides your owner with an extra wall of protection. Whether there’s one claim or 20 after an unfortunate incident, he won’t have to reach into his pocket to compensate impacted tenants as a "good will" move. I know of several occasions in which owners have written checks just to keep a customer satisfied.

Finally, the revenue that can be generated from tenant insurance is all found money, meaning the absence of a program is a lost opportunity. When properly implemented, a program usually generates more revenue than truck rentals or the sale of boxes, locks and packing supplies. If you manage a facility with 400 units and 85 percent physical occupancy, you could expect to have 60 percent of your tenants insured within five months. That level of buy-in equals $735 per month to the facility and an increase in property value of $126,000 based on a 7 percent capitalization rate.

In 2015, our seven Nashville, Tenn., locations tallied $186,000 in insurance sales. Our lowest performing store produced $19,000, while our highest produced $41,000. These are significant numbers you can use if trying to convince your owner to bring on a plan.

Choosing a Plan

There are different types of tenant insurance and tenant-protection programs from which to choose. If you’re tasked with shopping for plans, check your state statute to see what laws apply. Some states require a limited license to sell insurance. Thoroughly compare each plan, and then make an educated decision on the criteria that work best for you and the business. Some key questions to ask include:

Answers to these questions were determining factors when my company chose its provider.

As a manager, your buy-in and knowledge of the plan will go a long way in determining the success of the program. When we first decided to offer tenant insurance, we scheduled intensive training for our managers that lasted about two hours. It’s best to know why you’re offering a plan, how it protects customers and how it will help make your job easier. Make sure the provider you choose offers thorough training.

Selling the Plan to New Tenants

It’s typically best to broach the subject of tenant insurance when discussing the rental agreement during move-in. Customers need to understand their insurance responsibility and that the facility’s liability policy doesn’t cover damage to tenant belongings.

There are several ways you can offer the plan. My managers love being able to take care of clients simply by giving them an insurance-company brochure with an 800 number to call. You can also direct them to the provider’s website. In addition, one of the most effective selling tools is offering the convenience of a pay-with-rent program.

Chances are the self-storage management software you’re using has a built-in insurance module that’s integrated with several tenant-insurance programs. This feature enables you to make paying for insurance an easy and automatic process for the customer. A pay-with-rent program builds the payment into the rental rate, making it a seamless process and eliminating worries about separate billing.

Our results have been astonishing. Currently, our managers enroll an average of eight out of every 10 new tenants by assuming the sale. When you have these results across the board, the time it takes to enroll each tenant becomes irrelevant. For us, it takes less than a minute! Once you’re educated about the program and understand all of its benefits, offering tenant insurance will become as natural as asking for a driver’s license.

Marketing to Existing Tenants

Once a tenant-insurance plan is in action, you’ll want to offer it to your existing clientele. We reached out to current tenants through a letter campaign and tracked our results. We chose not to make our program mandatory. During a six-month period, we enrolled approximately 50 percent.

In communicating how the plan works, specify any features that may entice buy-in. For example, our program has a $0 deductible if the tenant secures his unit with a cylinder or disc lock. If he uses another type of lock, the deductible is still affordable at $100. The cost to tenants is very inexpensive, and you can make it easy on them with a pay-with-rent plan.

You really have nothing to lose by offering tenant insurance. As someone responsible for multiple self-storage properties, I receive all of the crazy phone calls from angry tenants who want compensation because they believe we’re responsible for everything that may impact their belongings. Even though it’s explained otherwise in their signed lease, they often have selective hearing and seldom actually read their rental agreement. I’ve had several conversations with customers who didn’t understand their responsibilities.

Anything can happen. If you’re not already offering tenant insurance to customers, I encourage you to look into the options. If your state allows you to sell a plan, make a recommendation to your owner. It’s a great barrier of protection for tenants and the business, and can significantly add value to the property you manage.

Stephanie Tharpe, who has worked in the self-storage industry for 17 years, is senior vice president of operations and marketing for A+ Storage of Tennessee LLC, where she oversees a portfolio of seven facilities in Nashville. She was named Manager of the Year by the Tennessee Self Storage Association in 2012 and presently serves on its Events and Education Committee. She’s also a moderator on the SelfStorageTalk.com online community and has been a featured speaker at Inside Self-Storage World Expo and other industry events. For more information visit www.aplustorage.com.