Weather-related disasters have increased significantly in recent years. Higher temperatures, more water vapor in the atmosphere and rising oceans are in the news on a regular basis. While the debates around causes persist, most people agree that climate change plays a role, and incidents are likely continue and become more severe.

How do these changes affect a self-storage operator’s insurance policy? Let’s look at the short- and long-term affects you’ll likely see when looking for coverage today and in the future.

Prepare for Change

The combination of more frequent and destructive weather patterns is causing insurance companies to evaluate their ability to insure certain risks and exposures. This is increasingly true for areas where severe drought is creating the perfect conditions for wildfires and brushfires. These are occurring more often and spread rapidly, resulting in greater losses for property owners and insurance carriers. It’s also prompting shifts in the insurance marketplace of which self-storage operators need to be aware.

Expect to see changes in insurance availability and terms of coverage for facilities in higher-risk areas. Because of the drought I mentioned above, regions that weren’t considered vulnerable to wildfires in the past are now potentially in danger. Wind, hail and hurricanes continue to be concerns in ever wider areas. In fact, hailstorms are among the major issues affecting coverage. They’ve not only become more common, hail size is larger and causing extensive damage to building roofs, siding, doors, signs, lighting and just anything else outdoors.

Another problem is ice storms. These are common in the Northeast, but they’re now also happening in the Midwest and other areas of the country. As Texas and Oklahoma experienced last year, these storms can cause major harm, especially if buildings aren’t prepared for this kind of adverse weather.

Some factors on which self-storage owners should focus when evaluating their insurance coverage include premiums, availability, deductibles, terms and the insurer’s ability to pay claims. Let’s examine these.

Premiums and Availability

The grassland fire that devastated a Colorado suburb in January is just the most recent example of wildfires becoming less discriminating about season and causing extensive damage to properties previously believed to have minimal catastrophe exposure. Drought in the western states is putting businesses at risk, even if they’re far from a forest.

Firestorms like the ones in Colorado and Paradise, California, result when heat from a wildfire creates its own wind system. Embers are picked up by the winds and carried for miles. Parched lands enable the fire to spark further.

The surge in wildfires is causing increased insurance premiums and reduced coverage availability. Self-storage owners may find themselves paying higher prices as insurers adjust to larger property claims. You may also find fewer options available from which to select your coverage.

Deductibles

Efforts by insurance companies to reduce loss from these types of weather-related incidents—and ultimately retain the ability to offer insurance at a fair price—have included higher deductibles. In fact, a company may now require something called an occurrence deductible, which is applied to any loss that occurs to the insured property.

An insurance company might also apply a separate deductible for losses caused by wind or hail, making the occurrence deductible lower. This supplemental deductible is usually a percentage, but it can vary by policy, so make sure you understand how it’s calculated and how much of the loss you, as the self-storage owner, will be responsible to pay.

Terms of Coverage

Another change you may see in self-storage insurance lies in terms of coverage. Instead of paying replacement cost for roof damage, the policy may now pay actual cash value. This means a deduction from the claim payment for depreciation, which is based on the age and condition of the roof at the time of loss. Make sure you understand how your carrier looks at roof damage and be aware of what you’ll be liable for should this type of loss occur.

Whether it comes in the form of strong gales, tornadoes or hurricanes, wind is causing more and more property damage. In fact, tornadoes are becoming rampant even outside of areas known for these types of events. These losses are usually treated the same as hailstorms in terms of insurance coverage. Your policy might even exclude the perils of wind and hail entirely. In this case, you’ll need to work with your agent to find a specialty insurance company that can provide separate cover. Be forewarned: It may now cost more to have both policies than in the past and the deductibles could be higher.

Ability to Pay Claims

Insurance companies have different financial strengths based on premium collected vs. ability to pay claims. What’s important about this to a self-storage owner? It’s knowing whether your carrier will be able to reimburse you for a loss. Ask your agent what the company’s financial rating is. Also, AM Best Company offers news, credit rating and financial data for the insurance industry, which can help you assess the ability of an insurance provider to pay out.

There have been so many catastrophic events in recent years. Insurance coverage has evolved in response and will continue to do so. You can expect to see continuing changes in product availability, pricing and terms. Working with an agent who understands your self-storage operation can help guide you through this dynamic environment.

Kay Schaefer is a self-storage program underwriter for Deans & Homer, an insurance-managing underwriter providing specialized coverage for the self-storage industry since 1974. For more information, call 866.753.2228.