As the self-storage industry has grown and matured, there is one area that I believe Owners do their Occupants a great disservice. That is, failing to offer a simple, easy to purchase contents insurance policy at the facility.
In the past, as an industry, we were simply grateful for the rental, and we all still dread the customer’s question, “How much is it going to cost me to move in today”. We have become conditioned and afraid to add that extra few dollars to that total in fear of chasing the customer away.
You owe it to your customers to offer some kind of contents insurance plan that the occupant can easily opt into right at the counter. This article does not intend to recommend one particular type of policy over another, rather to say it is not appropriate to ask customers to either rely on Homeowners/Renters insurance or to go find this type of insurance on their own.
Why do I not recommend Homeowners/Renters Insurance? ‘The simple reality is, Homeowner and Renters insurance policies are forms. There is little difference between the actual coverage from one company to another. The difference between most insurance companies are the additions, the service, or maybe just a really cute spokes gecko. Homeowners and Renters insurance policies, for years, have been reducing various types of coverage. As examples: 1. The types of water infiltration that are covered have been greatly reduced in any form insurance policy. 2. The value of property covered that is stored out of the home/apartment has also been greatly reduced. 3. Also, many people have been convinced by their agents to raise their deductibles. Let’s put all that together in a self-storage context. A tenant has a Homeowners insurance policy with various limitations on the type of water intrusion and a $1,000 deductible. At your facility there is an ice dam in front of your units forcing water back under the doors, creating a situation where a $1,000 couch and chair are ruined. Occupant calls his insurance company and the insurance company denies all liability because it was a form of water infiltration that is not covered and even if it was covered, the damages are $1,000, so the deductible “eats up” the coverage therefore, there is no money due. The occupant is now frustrated, and looks for someone to blame, the only person left is you. Meanwhile, for a few dollars a month, you could have offered coverage written for the types of hazards that actually occur at self-storage facilities, with a low or zero dollar deductible. In that situation, had the tenant made a claim, they at least potentially would have received a settlement check. Because you offer the policy, in order for the tenant to get the settlement check from the insurance company, a release which includes your self-storage facility must be executed by the Tenant. Once a release is executed, and you are within reasonable bounds of certainty, that the claim is over. If the tenant is actually paid what they think they are owed, my guess is that they would remain as a customer and speak positively about you on social media, because while something bad happened, they got money for their junk.
Most of your customers are in a rush to get out the door and get the stuff into storage. They may very well mean to insure later, but forget and again, this leads to the potential of blame for being uninsured falling to you. Finally, if for no other reason, offer insurance so that you can say it was offered and a occupant refused it, as a means to diffuse litigation for damage later.
You may also hear that there is some amount of revenue that you can make by offering insurance. Generally, this is true in the form of a marketing or administrative fee that the insurance company pays you for handling certain parts of the transaction.
In 2016, I attended the New York State Self-Storage Association Annual Meeting and a member got up and talked about having a fire at her building and how heart breaking it was to look at some of these very long term customers of hers in the eye and say, “you’ve lost everything, I’m sorry”. At that point, she said she wished she had at least offered tenant insurance, so she could feel better, and perhaps if she actually required insurance, she wouldn’t have had to have these heartbreaking conversations.
Finally, there is a concern in the industry, about whether or not it is legal to offer insurance in every state. This article does not seek to provide a legal opinion that the offer of insurance in every state is legal. However, the National Self Storage Association, has been working diligently to obtain limited lines licensing in many states. You should speak with a licensed insurance agent, preferably one who concentrates their work in the area of self-storage to determine whether there are any special requirements to offer insurance and if contents insurance can be offered in your state. If insurance cannot be offered, there are certainly alternatives such as protection plans. Either way, offering nothing at all is something we should all agree is no longer acceptable in our industry.
Jeffrey J. Greenberger is a Partner with the law firm of Greenberger & Brewer, LLP, in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. Mr. Greenberger’s practice focuses primarily on representing the owners and operators of commercial real estate, including self-storage owners and operators.
The opinions of this article are those of the author and the article should not be construed to constitute legal advice. Before undertaking any change to your policies and procedures, consult with your own attorney and insurance agent or broker. The opinions in this article should not be construed to create any sort of attorney/client relationship between Jeffrey J. Greenberger and the reader. Questions should be directed to Jeffrey Greenberger firstname.lastname@example.org or by calling his office at 513-721-5151.