An essential way to guard your self-storage business against legal and financial risk is to sell tenant insurance or a tenant-protection plan to your customers, but which is best for your operation? To arrive at an answer, you need sift through a complex array of factors. This article offers guidance to help you make an informed decision.
Protecting your self-storage business should always be a top priority, and it includes your customers and their stored belongings. One way to do this is to offer a tenant insurance or tenant-protection plan, but it can be tough to know which product is the best fit for your operation. It’s a complex decision. This article will help you understand the individual programs, why you should offer one or the other, and how to choose the right provider.
Understanding the Programs
Though tenant insurance and tenant-protection plans appear to be the same from the renter’s perspective, there are key differences to the self-storage operator.
Tenant insurance is the original model used to cover customers’ stored goods. It’s more highly regulated than tenant protection, with the program terms and pricing set by insurance regulators in each state. Most states will allow you to sell this product with a valid license. The self-storage facility is issued a master policy, and each tenant receives a certificate of insurance. The owner isn’t involved in the risk transfer; tenants go directly to the carrier to file a claim.
Tenant protection is a new product that’s rising in prominence within the self-storage industry. No one from your facility has to be licensed to offer it. This program also offers more control over pricing and terms. Under this model, the owner accepts limited liability for tenants’ stored items. They then insure that liability through a Contractual Liability Insurance Policy. The named insured is the facility, not the tenant; but the policy still offers the same level of individual coverage in most cases.
Why Offer Either Program?
Whichever program you choose to offer your self-storage tenants, there are many advantages to you as the facility operator. First, these products help reduce the risks associated with storing peoples’ belongings such as theft, damage or loss, thereby minimizing potential liability.
All facilities deal with issues from time to time; it’s part of the business. By implementing one of these safeguards, your customers won’t come to you when something bad happens. Instead, they’ll file a claim with the program provider. In the unfortunate event of a theft or property damage, a tenant can receive reimbursement for the value of their stored items up to a specified limit.
The No. 1 reason why self-storage operators participate in tenant insurance or a tenant-protection plan is to generate revenue from the share they earn from enrollment. Depending on the provider, the income you generate can be significant. Not only will you make a bit of profit from every sale, you’ll have more satisfied customers, which helps your business in other ways.
Finding the Right Fit
Now that you’re informed about the two types of programs—tenant insurance or a tenant-protection plan—and why it’s important to offer one, it’s time to choose the best option for you and your self-storage customers. Consider what’s most important to you and your business. To effectively evaluate providers, consider these key factors:
Coverage. Make sure each provider clarifies what’s covered. Not all programs are the same. The most comprehensive ones include protection for risks including mold, mildew, rodents and other vermin. Some include coverage designed specifically for outdoor boat/RV storage.
Cost and limits. Determine the monthly cost to your self-storage tenants and the coverage limits available. On average, providers typically offer $2,000 in coverage for $9 to $12 a month. Here’s a good rule of thumb: The cost of your base coverage amount to customers should not exceed 15% of their monthly rental rate.
Risk. Understand how risk is transferred. Compare the insurance carriers behind different providers and check their credibility. Look for programs backed by carriers with strong financial ratings.
Enrollment and revenue. The revenue share a provider offers for enrolling customers in their program is only part of the equation. Understand how the company will help you drive participation, and know the average enrollment percentage. A high revenue share with low enrollment means nothing. You can anticipate expected revenue by factoring in anticipated tenant engagement.
Ease of implementation. Select a program that operates efficiently with minimal burden on you and your staff. Evaluate each provider’s technological capabilities to determine the best fit.
Claims process. How easy is it for tenants to file a claim? Look for providers who deal directly with your customers and don’t need to involve the store or its staff. Efficient claims handling is pivotal to a seamless operation, so prioritize companies that offer a streamlined process with an in-house adjuster, sparing you the headache of angry tenants. This approach offers full transparency into what’s happening but shouldn’t require any direct involvement from you.
Tenant-insurance and tenant-protection programs are valuable additions to any self-storage business, offering benefits such as risk mitigation, enhanced customer experience and revenue generation. With careful consideration and strategic planning, the right product can contribute to your facility’s success and longevity.
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