Submitted to Investment Real Estate by Maureen A. Lee at Xercor Insurance Services LLC
Self storage owners are in the real estate business, that is, the business of renting space to consumers. However, just as real estate agents are not responsible for the home once it is sold or rented, self storage operators are not responsible for the tenant’s belongings once the rental agreement is signed. That is why in many cases the operator’s rental agreement contains an insurance clause which requires the tenant to have some type of insurance on their belongings before they can move into the self storage unit. This is for the protection of the operator, but most importantly it’s protection for the tenant.
If an operator is offering a third-party tenant insurance program, the property manager makes the offer at the point of lease. When the property manager is reviewing the rental agreement with the new tenant, he or she will point out the insurance clause within that rental agreement. At this point, the property manager will mention that if the tenant has a homeowners’ or renters’ policy, the tenant can bring in a copy of the policy’s declarations page to the self storage facility for their file, and waive the third-party option. However, if they prefer, the self storage facility has third-party insurance coverage available as well. In many cases, the tenant is going through a life transition and may not have an insurance policy to provide the facility. And for those tenants who do have homeowners’ or renters’ policies, the property manager should still present the tenant with the marketing materials and give an overview of the benefits available through the third-party tenant insurance program. Operators may often find that the tenant will enroll in the tenant insurance program offered, even though they have an existing insurance policy.
Homeowners’ policies are intended primarily to protect the structure of your home and its contents. However, these policies typically provide limited coverage for damages to belongings “off premises”. In other words, if a tenant’s belongings are damaged outside their home, for example, in their self storage unit, they would only receive a percentage of the total loss. Also, there are different types of homeowners’ policies and some are more limited than others regarding what perils they cover. Many of them don’t cover vermin, flood, mold or earthquake, for example. Typically, the deductible is also higher on a homeowners’ and renters’ policy. Another factor the tenant must consider is their current loss history with their homeowners’ coverage. Is it worth filing a claim with your homeowners’ for a two thousand dollar loss of your belongings from your self storage unit, if it means the premium payment increases at renewal? Probably not.
Tenant insurance, like homeowners’ or renters’ policies, should be designed to cover losses that are related to the rental of the storage unit – which is contents coverage. Some types of losses that typically occur at a self storage facility include rodents, vermin (birds, insects, moths), mold, floods, burglaries and water damage due to leaks in the roof. Does the tenant insurance you offer cover those types of losses? If a storage operator is currently offering a tenant insurance program or is thinking of offering one, he or she should make sure that their available tenant insurance is providing those types of coverages. Plus, he or she should consider the cost being passed on to the tenant. After all, tenant insurance is supposed to be convenient and affordable, and provide more than adequate coverages.
Most tenant insurance programs offer earthquake coverage and some have options for rodent or flood, but these are incorporated into the coverage; the operator or the tenant elects to those coverages. There are also some programs, like Xercor Insurance Services, that offer sub-limits for mold/mildew, flood and vermin in addition to all the standard covered perils, and still at affordable prices. So, while a real estate agent doesn’t have any control over the protection of a client’s home after the sale, self storage operators can provide their tenants with more than just storage space, but with peace of mind that their belongings are protected with a comprehensive third-party self storage insurance policy upon move in.
About the author:
Maureen A. Lee is President & COO of Xercor Insurance Services LLC located in Indianapolis, Indiana. Prior to Xercor, she worked at Bader Company before leaving to start her own consulting company, M.A. Lee Consulting, Inc., where she worked on compliance issues within the self storage industry. She is a former member of the board of directors of the national Self Storage Association. Currently, she serves on the SSA Foundation Board of Governors and Chairs the Best Practices Committee. She has assisted the SSA in drafting limited lines legislation and has testified before various state legislatures supporting limited lines legislation. She graduated with a B.A. in History from Butler University in Indianapolis, Indiana.