James Appleton, MiniCo Insurance Agency, LLC, Director of Sales, Special Risk

When it comes to customers’ stored belongings, industry professionals jest that tenants store junk but lose heirlooms. In other words, the items they place in storage don’t seem to have any value to them until there is an event in which those (oftentimes forgotten) goods are either damaged, stolen, or deemed unsalvageable.

While utilizing high-tech security systems, professionally written rental agreements, climate-control features, and pest-control products are prudent practices, the wisest of self-storage owners and operators know that mishaps still happen. Natural disasters, fires, and burglaries are just a few of the countless catastrophes that can expose your self-storage business to liability.

One way to protect your tenants’ possessions—and your facility’s reputation—from unforeseen events is to implement an insurance requirement. That is to say, all renters would be required to either provide proof of coverage from their current homeowner’s or renter’s insurance or obtain tenant insurance.

Assurance From Insurance

Although the majority of self-storage owners and operators have a clause in their storage lease notifying renters that they are not responsible for stored goods in the event of a loss, that doesn’t prevent disgruntled tenants from attempting to obtain compensation for damages. Moreover, according to James Appleton, director of sales, special risk for Phoenix-based MiniCo Insurance Agency, LLC, having tenants assume the risk is not advantageous for the facility or its customers.

“If there is a loss, the tenant has nowhere to go but to the operator,” says Appleton, who recommends that all tenants have evidence of insurance to rent storage units. “It’s in the best interest of consumers to work with an insurance product. Tenant insurance is good for both operators and tenants.”

There’s no denying that tenant insurance can provide peace of mind to renters as it protects their belongings, but, as Appleton notes, it’s beneficial to facility owners and property managers as well.

“It protects a facility from liability,” he says, adding that owners and managers don’t have to deal with angry tenants as they are dealing directly with the insurance company and its claims department, adjustors, and insurance professionals. “It separates tenants from a relationship with the facility.”

The separation of accountability that Appleton mentions typically leads to a more understanding mindset during the aftermath of an incident as tenants have assurance that their insurance provider will cover a covered loss.

Options And Benefits

As stated previously, self-storage operators can give renters the choice to opt out of securing tenant insurance by presenting evidence that their homeowner or renter’s insurance policy covers goods stored off their property. However, if an incident occurs, the tenant would have to pay a deductible. Plus, filing a claim could cause their monthly insurance premium to increase. Homeowner and renter’s insurance policies have sublimits on certain items as well.

“People don’t read documents fully,” says Appleton, “and they’re not fully protected—even if they think they are. Giving them an option is good, but tenant insurance guarantees that renters are protected.”

Self-storage tenant insurance programs, such as the ones offered by MiniCo Insurance Agency, is specifically designed for self-storage tenants and an additional revenue stream for self-storage facilities. The company, which first introduced customer storage insurance to the self-storage industry in 1974 and is a national leader in the industry today, has two unique tenant insurance programs available: TenantOne Direct and Pay-With-Rent tenant insurance.

According to Appleton, TenantOne Direct is a good option for self-storage owners and operators who don’t want to be involved with the paperwork that goes along with signing up customers for tenant insurance. “It’s our over-the-counter program,” he says. “Tenants deal with the insurance company directly.”

Essentially, operators who choose this route are distributing pamphlets about the tenant insurance program to customers who do not have a homeowner insurance policy or want additional coverage for their stored items. While TenantOne Direct doesn’t yield a financial benefit for the self-storage facility, it does help ensure that renters won’t appeal to the facility for compensation if their belongings are spoiled.

Per the program’s informational flyer, TenantOne provides affordable insurance coverage for these causes of loss: burglary, lightning, windstorm, hail, building collapse, explosion, vandalism, riot, fire, smoke, earthquake, water damage, rodent or vermin damage, and transit damage within a 100-mile radius of the facility. With MiniCo’s self-storage tenant insurance, there is no deductible.

What’s more, the insured receive no negative marks on their history for filing a claim as MiniCo does not report claims to any claims bureau. Its insurance policies are available in all 50 states and the District of Columbia, and they are legally regulated by the Department of Insurance. “Regulation makes people feel more comfortable,” Appleton adds. “Tenants are issued an actual insurance policy; that’s another benefit of working with an AMBest “A” rated insurance company.”

Similar to other types of insurance policies, the tenant’s monthly premium is based on the limit amount they select to cover their stored goods.

Self-storage operators who are seeking an additional source of income with minimal administrative effort may want to offer the Pay-With-Rent tenant insurance program to their tenants. While it offers the same benefits as the TenantOne program, the Pay-With-Rent program enables tenants to do exactly as its name implies: Pay the monthly tenant insurance policy premium along with the monthly storage bill instead of making two separate payments.

Appleton says this option is ideal for operators who “want to streamline operations and not deal with tenants if there is a loss”. With MiniCo’s Pay-With-Rent program, operators obtain a limited lines license, if required by their state, and receive commission or an administrative fee on the policies they sell. The revenue can even be received in two different ways, depending on the storage operator’s preference. There is an upfront option that pays commissions as they are earned or a captive option, which Appleton says is more of a long-term investment strategy where revenue distribution is basically controlled by the operator. While the revenue varies by operation, selling tenant insurance can become a significant source of income with motivated and trained managers on board.

Speaking of managers, MiniCo Insurance Agency provides professional training for its Pay-With-Rent tenant insurance program. “The training material is not ambiguous,” Appleton says. “The manager training is approved and signed off on.” This means, after completing the training course, self-storage managers have the knowledge and confidence to properly sell the tenant insurance to customers.  

Limit Liabilit

All things considered, limiting your liability should be at the top of your to-do list as a self-storage owner/operator. The future success of your storage facility relies on your ability to protect it from potential lawsuits, resentful tenants, and a sullied reputation—any of which could quickly turn a profitable property into a bankrupt business.

Erica Shatzer is the editor of Mini-Storage Messenger, Self-Storage Now!, and Self-Storage Canada.