As a storage owner and operator, you understand the value of protecting your tenants’ belongings. The real question is, what’s right for you – tenant protection or tenant insurance?
We’ll provide a detailed side-by-side comparison in just a moment. First, let’s focus on the major differences between protection and insurance – licensing and rates.
Licensing
All 50 states have insurance rules and regulations. Anyone at a storage facility who offers tenant insurance to a customer — including the store owner or manager — is required to be a licensed insurance agent in that state. If you own storage facilities in multiple states and plan to offer tenant insurance to customers at all of your facilities, you should ensure you first obtain the required licenses in every state in which you do business.
In many states, if structured correctly by a reputable provider, tenant protection does not require licensing and is not limited by insurance rules and regulations.
Rates
Tenant insurance also requires that the carrier follow each state’s insurance guidelines when changing rates or commissions. Under state regulations, rates and commissions can’t be arbitrarily adjusted by the facility owner or operator. Rather, the tenant insurance carrier must submit any proposed changes to the state’s insurance department for review and approval.
Protection plans don’t have these requirements in many states, enabling the flexibility to adjust rates as long as it doesn’t go against public policy.
Now let’s dive in a bit deeper on the differences between tenant protection and insurance.
The CLIP
You may have noticed the term contractual liability insurance policy (CLIP) mentioned above. This is a key element of tenant protection that transfers the limited liability a store owner/operator assumes to the tenant protection provider. From there, the provider’s insurance carrier insures the risk and in most cases, directly handles claims management and resolution.
The Importance of Revenue Share
Before signing up for tenant protection or tenant insurance, don’t forget to carefully consider the potential revenue to be earned from each option.
Tenant protection and insurance both guard your bottom line by removing claims liability and by covering property damage caused by tenants. However, under tenant protection and insurance programs, the amount of revenue shared with the store owner varies greatly. Tenant insurance programs average 40% revenue share to the store owner. Basic tenant protection plans will earn you 30% - 40% revenue share as well. There are protection plans designed with the store owner and their tenants in mind, and offer industry-leading revenue shares of up to 70% - 75%.
