Self-Storage Operators Can Benefit by Offering Tenant Insurance

Self-Storage Operators Can Benefit by Offering Tenant Insurance

As a self-storage investor you will likely be affected by crime at some point. Whether it’s vandalism, arson, burglary, drugs or an accident, the possibility exists because self-storage facilities are busy places. And, with the large variety of items being stored, self-storage facilities are a prime target for break-ins. With that said, offering your tenants insurance is a prudent idea.

Not to scare you away from self-storage investing, but even the best managed facilities are at risk. According to a 2002 report, nearly 25 percent of all self-storage operators across the U.S. reported a break-in or theft. Even though rates have dropped in recent years, you can probably expect your facility to get hit at some point during your involvement with the operation. So, while doing everything you can to deter crime and keeping your facility clean and safe, it would be beneficial for self-storage facility owners and managers to offer optional tenant insurance to its customers as well.

The kind of coverage you should consider offering is a specialized insurance that would protect your tenant’s property against theft, loss or damage. Tenant insurance coverage is not usually included in the self-storage facility’s insurance policy – but your insurance agent should be able to provide you options or refer you to a company that can.

There are multiple reasons why it is advisable to offer your tenants coverage – with the most important one being – to limit your liability. Because many tenants do not understand self-storage and their responsibility to protect their personal belongings, they’ll likely blame you, the self-storage operator, if their property is lost, destroyed or stolen.

Even if your lease agreement makes it perfectly clear that the self-storage facility is not responsible in any way for the client’s property, you’ll be the first to blame, and possibly sued. By offering the tenant insurance right from the get-go, many courts will reduce the facility owner’s liability.

Another benefit of offering tenant insurance is that your prospective and existing customers will feel more confident about renting storage space from you. Most customers are going through some sort of life change, and regardless of what it is, they don’t need another responsibility. Plus, they are attached to the items they are storing. By offering tenant insurance and educating them about the benefits, you’ll help your customers feel more comfortable about renting self-storage space.

An often over-looked benefit of offering tenant insurance is the fact that some insurance companies will pay you a fee for selling and administering their tenant insurance programs. This can add to the business’ bottom line while at the same time increase the value of the business. While the fee an insurance company pays the self-storage facility owner varies, it all adds up.

A self-storage facility operator generally offers tenant insurance in two ways. The first is a mail-in program where the insurance company provides all the marketing collaterals and forms to the operator, who hands them out to new customers. The tenant then fills out the forms and mails it in along with payment. This way is easy for the operator, but fewer tenants will sign up. The second method is popular because the insurance payment is included with the storage fee. This is more work for the operator, but keeps things simple for the tenant. More customers will buy insurance if it is offered this way and most appreciate the convenience and peace of mind it provides.

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