Business Insurance Planning

Self-Storage Facility Insurance: The Coverages Every Owner Needs

One of the most important ways to protect your self-storage business is to ensure you have the right insurance coverage. Consider the following policies to reduce your risk.

By Melanie Wichelman

Self-storage owners are part of a fast-growing and unique industry. Business is on the rise, new facilities are popping up all over, and storage has proven to be a wonderful and profitable venture.

When you have such a large investment, it’s important to understand how to properly protect it. One of the best ways is to ensure you have the right insurance coverages and policies in place—ones that are specific to your business needs.

Self-storage companies have exposures that make them special. The daily tasks an operator considers to be the norm create exactly the kinds of risks that make a facility’s insurance requirements unique. It’s important to review the coverages that are tailored to meet those needs. Let’s look at the general coverages as well as industry-specific policies every storage owner should have to protect his business.

General Coverages

When you think of insurance coverages, the first ones that come to mind are buildings and business-personal property and commercial-business liability. Many view these as the base blocks of a quality policy, as they’re vital in safeguarding your business.

Buildings and business-personal property is an essential coverage for any property-related claims that may arise. Examples include suspicious fires, faulty electrical wiring or fence damage. Look for a policy that includes replacement cost vs. actual cash value, as replacement cost doesn’t take depreciation into consideration when valuing a claim. This makes it quicker and more efficient to indemnify your property and get it back up and running. You may also want to consider blanket coverage for the buildings.

Commercial-business liability covers exposures that arise from bodily injury or property damage due to facility operation. Examples include falls, slips and trips. In the self-storage world, even something like a gate accident can cause bodily or property damage. Having the correct commercial-business liability limit will help you avoid paying for the large claims that can be associated with these incidents.

Another important and common coverage for self-storage is business-income coverage, also known as business-interruption or extra-expense coverage. This is designed to reduce any further risk in the event of a loss. If a facility suffers a covered loss, such as a fire, there can be an indirect loss of income or profit. However, there will still be many ongoing costs the owner has to pay during this time. There may even be some extra expenses endured while getting the business back to normal. This crucial coverage helps you continue operating so you’re able to take care of these costs and move forward.

Storage-Specific Coverages

There are two coverages most know as being specifically designed for self-storage facilities: customer-goods legal liability and sale and disposal liability. Both are valuable and essential.

Customer-goods legal liability provides coverage for claims arising from loss or damage to tenants’ stored property. Storage facilities aren’t responsible for customers’ goods, and this should be clearly stated in the lease. The facility never takes possession of property, merely providing rental space. However, there are certain situations that can still create some liability, and claims may arise against the facility for damaged goods.

An example of this would be if a tenant’s goods are damaged because the owner didn’t properly maintain the facility. He could be accused of being negligent. Customer-goods legal liability ensures you’re covered against this type of claim. It can also cover the legal costs even if the claim is determined to be false or groundless.

Sale and disposal liability is a little bit different. It provides coverage against the act of wrongfully taking, selling, using or destroying tenants’ goods. A common example is when a renter is evicted for non-payment. Owners have the right to dispose of the property through their state’s lien laws, however, claims can still arise. If one does, sale and disposal coverage will protect the storage business as well as cover the legal costs associated with a lawsuit.

A unique coverage that’s often overlooked but just as important as the others is pollution liability. Most standard policies exclude various types of pollution exposures. This leaves coverage gaps, making owners vulnerable to huge costs associated with a pollution accident. A separate pollution-liability policy can cover these holes and provide peace of mind.

There are many pollution exposures at a self-storage facility that many don’t even realize exist. Some can have a big impact. Leaks from RVs or other stored vehicles, illegally stored substances, toxic chemicals, and oil drums are just a few of the common items that could lead to a catastrophic event and expensive clean-up. Definitely consider adding this coverage to your insurance portfolio.

The Owner’s Part

These are just a few of the coverages that are essential to protect your self-storage operation. By working with agents and carriers who specialize in the industry, you’ll be able to build a policy that suits your insurance needs. To ensure you’re getting the best coverages and most affordable premiums, do your part and be proactive in preventing claims:

  • Be mindful, follow general maintenance procedures and stay diligent.
  • Follow all state laws, especially those associated with sale and disposal.
  • Have a well-written lease to ensure the expectations between your business and tenants are clear and well-defined. This can help prevent and discourage claims.
  • Stay up-to-date with current industry developments and technologies.

Accidents can and do happen, even to the most conscious and diligent owners. When you have the right coverages in place, they’ll protect you if and when these accidents do occur. The expenses associated with just one accident, claim or lawsuit certainly outweighs the cost of an insurance premium.

Melanie Wichelman is an account executive with Universal Insurance Programs, which has created and provided specialized insurance coverages to the self-storage industry for more than 20 years. For more information, call 800.844.2101; visit www.universalinsuranceltd.com.

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