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Self-Storage Insurance: Changing With the Times

I have a love/hate relationship with technology. I love it when it works, saves me time and money. I hate it when it breaks down, wastes my time and costs me money. Sometimes the same piece of equipment or software program that was the apple of my eye one week will become the bane of my existence the very next week. What’s that you say? You feel the same way? I’ll bet there are a few more things we agree on.

Computers now play essential roles in self-storage business operations but technology is changing all the time. Keeping up with change is important in a competitive business, which is why this issue of the magazine, focusing on technology, attracts so much annual attention year after year. We all need to keep up.

New in the Market

While insurance does not subscribe to Moore’s Law of exponential change that says that computer chips will evolve to double in capacity every 18 to 24 months, insurance policies, insurance providers and insurance needs do change over time and should be reviewed periodically by every business owner.

In the past couple of years, several of the major insurance providers have developed new insurance products specifically for the self-storage industry. What’s new may apply to you.

Liability

Several programs have been introduced to address the liability exposures unique to self-storage, which include customer’s goods legal liability, and sale and disposal legal liability. Some self-storage operations are unable to place their property insurance with insurance companies that offer these specialty liability coverages for reasons such as the high value of property at risk in a single building or proximity to catastrophic exposure such as hurricane or wild fire.

Some operators may simply choose to place their general property and liability exposures with a separate insurance carrier at a lower rate than may be available from the insurance companies that specialize in self-storage. These separate liability programs are designed to fill the gaps of a standalone facility or generic business property and liability insurance package.

Catastrophe

In another some-what recent development, one of the major insurance providers announced an agreement with International Catastrophe Insurance Managers to provide a market for property and wind coverage in high-risk coastal areas. This may provide long-sought relief for self-storage operators in the Southeast and Gulf Coast areas who have found it increasingly difficult to place insurance for their properties.

Hazardous Contents

Concerns about the cost of cleanup and disposal of hazardous contents found in storage and the liability that may result from contamination to property or person are not new to the industry. However, a new program to deal with these concerns, addressing the exposures left uninsured by specific pollution exclusions common to most property and general liability insurance policies, was introduced by one of the main self-storage insurance markets early last year.

Uninsured Property

Storage facility operators have long been aware of the problems that arise from loss or damage to uninsured property stored by their customers. Insurance products that make property coverage available to tenants through a mail-in brochure available at the storage facility or sold by the operator and paid on a monthly basis with rent have been around for many years. However, it has only been a few years since several insurance markets have created the ability for customers to purchase insurance online, sometimes through a link to the storage facility’s own website.

Another new option allows the owner to transfer limited liability for stored property, accepted through their rental agreement, to their insurance company. This last option has opened up new possibilities for unit rental pricing in a competitive market and a new service to offer their customers.

Cost of Relationships

Insurance is a very different kind of product than a management-software program, but the business considerations that go into which product to buy and when to make a change have a lot in common. Whether you are looking at an insurance program or a software program, along with the price of the product you will want to give a lot of consideration to the people and the company you are purchasing from and the service they are prepared to provide.

When you purchase a product or a service that requires an understanding of your business needs and relies upon professional or expert advice, the people and businesses you choose to work with are very important. Most independent insurance agents and companies can insure a self-storage operation, but they may not be familiar with your business or know how to respond to some of the unique risks and claims that result from self-storage operations. This may be particularly true of local insurance firms if you operate in a rural area where agents and the companies they represent must often become jacks-of-all-trades but masters of none.

I am a big supporter in local representation because I believe that a close relationship and proximity are important in an insurance transaction. However, I would not trade local representation for the importance of professional understanding of both insurance and the self-storage business. I offer two solutions to this problem:

1. Numerous agents and brokers specialize in self-storage and work with owners/operators across the country. They can provide the professional service you deserve even if they are not located near your business.

2. Many insurance providers specialize in working with the self-storage industry and working with independent agents. They are usually quite willing to work with your local independent agents to provide them with the knowledge they need to properly evaluate your insurance needs and design a program that is appropriate for your business.

Even when products remain unchanged, people, pricing and service of an insurance provider can change. People retire or change jobs; insurance pricing fluctuates among companies over time; and support service that was once a strong reason for your selection of an insurance provider can be altered. If you have doubts or concerns about your insurance program because of changes in people, service or price, it is better to address these before you need to make a claim rather than after a real need arises.

Changes Within

One more agent of change should cause business owners to pick up the phone and call their insurance agent or provider: changes you make to your own business. A well-planned insurance program can become ineffective with change in a business that is not disclosed. Property exposures that are adequately insured at the inception of an insurance program can become underinsured when additions or improvements are made over time. Liability insurance underwritten to cover self-storage operations may not extend to new, ancillary services that an operator may venture into after the contract is written.

Change happens, and it happens in many ways that have a direct impact on your insurance program. When you buy insurance, just like when you invest in new technology, you will be happy when it works, saves time and money. This means keeping up with change. In other words: If you change along with the times, change can become an ally to your business. 

Scott Lancaster started his insurance career in 1976 as a licensed insurance agent and broker in California. He is now the regulatory compliance officer for Deans & Homer, where he was hired as a commercial lines property and casualty underwriter in 1985 and has worked in the self-storage division since 1993. Deans & Homer has been providing insurance products designed to respond to the unique risks of the self-storage industry since 1974. For more information, call 800.847.9999; visit www.self-storage-insurance.com.

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