Are You Covered? Self-Storage Insurance Basics

by Randy Tipton, Universal Insurance Facilities, Ltd.

Insurance is a necessity for your self-storage facility. Your operation has technical, legal, and financial aspects that are not found in other businesses. And since your business is unique, you will want coverage designed to meet your special needs. When shopping for insurance, consider consulting an insurance specialist who caters to the industry. You can often save money, and get better coverage, by shopping with a specialty insurance agency. The insurance company you choose should have specialized knowledge of the self-storage industry, as well as a commitment to staying current on industry changes through education and training. A company that is very familiar with current construction costs, or that has in-depth knowledge of the latest keyless security systems, for example, can more realistically handle any claims you may have as well as provide you with the proper coverage in the first place. Look for a company that will work with you to help reduce losses in the workplace, which in turn can help contain your insurance costs.

Before working with an agent, do some research on the insurance company’s financial rating. You’ll want to work with a quality insurance company which has a strong financial rating (indicating the company’s financial ability to pay out future claims). You can research a company’s financial rating through agencies such as A.M. Best or Standard & Poor. These companies provide an independent opinion of a company’s strength, based on a series of financial evaluations.

As you research your self-storage insurance options, keep a deductible amount in mind with your budget. Choosing a larger deductible can be an easy way to lower your premium, since you agree to assume a greater share of the risk. Your agent or broker can advise you on the amount of savings to expect. Just don’t allow the idea of additional savings to cloud your business judgment; be sure to choose a deductible that won’t wipe out your savings if you suffer a loss.

Unique Self-Storage Insurance Coverages Specialists can provide a business owner’s policy that incorporates coverages for the unique aspects of your facility. While most standard policies provide coverage for your building, business personal property and business liability, a self-storage insurance policy offers coverages to help guard against issues and hazards that only surface in the self-storage industry. All of the insurance components described below are part of any good, comprehensive self-storage insurance package.

Customers’ Goods Legal Liability
When you own a self-storage facility, you act as a landlord, not a warehouseman, because you never take possession of your tenants’ goods. You are not responsible for those goods, since you are simply renting space. However, there are certain situations that can create legal liability on your part. For example, by providing a building in which to store goods, you represent protection against the elements. If customers’ property is damaged by water because you did not properly maintain your roof, a tenant may feel you were somehow negligent in honoring that representation.
If you are found legally liable for damage to tenants’ property, your customers’ goods legal liability insurance coverage will probably pay the claim. It might also provide defense costs, even if a claim is found to be groundless, false or fraudulent. It also includes coverage for damage done to customers’ goods stored in the open. This coverage is not normally available in the standard insurance market and usually cannot be added to standard business owner’s policy.

Business Liability Insurance
Business liability insurance provides protection against lawsuits claiming that someone was hurt or property was damaged on your premises. It provides protection against personal injury lawsuits involving libel, slander, physical eviction or false arrest of a third party. It also protects against advertising injury lawsuits involving plagiarism of advertising copy or layout; infringement of copyright, title or slogan; or false advertising. These may not seem like bodily or property damages, but that is how the courts have interpreted them. If you are found liable, business liability insurance will pay those sums you become legally obligated to pay.

Business Interruption Insurance
Business interruption insurance, also referred to as "business income" and "extra expense" insurance, is designed to reduce your risk in the event of a loss. It protects you against reduced income and increased expenses that result from damage to your buildings or business personal property. This is especially important in the event of a disaster that calls for long-term clean-up and re-building. It allows you to retain key employees by maintaining their salaries and benefits. In addition, it encourages prompt settlement of building and business personal property losses. It helps you to retain your tenants and can restore you to the same position you were in before the loss occurred.

Business interruption insurance is usually included in most business owners’ policies as a standard endorsement extended period of indemnity. However, when you consider that business interruption losses can easily exceed direct damage losses, the importance of this coverage becomes clear.

Sale and Disposal Legal Liability
elf-storage owners are often faced with evicting tenants, reclaiming the storage space or, in the case of abandonment, removing or disposing of the tenant’s property. Sale and disposal legal liability coverage provides protection against conversion: the act of wrongfully taking, selling, using or destroying the goods of another party.

Nearly every state has specific statutes governing the sale and disposal process. However, if the procedures are not followed to the letter, or if there is an error in any step of the process, self-storage operators are left vulnerable to lawsuits claiming loss of or damage to stored goods. Due to the incredible diversity of goods commonly stored and the wide range of values of the property, the penalty for conversion can be extremely high.

Flood Coverage
elf-storage insurance policies, like most commercial policies, do not include flood insurance. Many facility owners do not realize their standard business policy does not protect them until it’s too late. As a matter of fact, only a small portion of businesses exposed to the risk of flood damage are insured.
Fortunately, it’s easy and inexpensive to protect yourself against flood through the National Flood Insurance Program (NFIP), which is backed 100 percent by the federal government. The NFIP divides risk areas into three basic groups: low, medium and high. Less than one-third of all reported flood claims come from high risk areas, and more than one quarter come from low risk areas. That’s why most business insurance experts strongly recommend you have flood insurance, even if you are at low risk. You can get good and affordable coverage even if your facility is in the boundaries of a flood plain. Flood insurance costs an average of just a few hundred dollars per year for businesses; and a special, low cost, preferred risk policy is available for businesses in less hazardous areas.

Preventative Maintenance
Keeping your storage facility maintained will help reduce your risk of liability and property damage claims. A well built and kept facility can decrease the possibility of severe weather damage. I recommend implementing a maintenance program to help minimize occurrences. The following is a partial list of preventative maintenance measures:
• Check roofs, drains and gutters on a scheduled basis.
  Clean gutters monthly.
• Check roofs for rotting and leaking.
• Perform regular inspections that include buildings, doors and paved areas.
• Keep inspections documented in maintenance records.
• Permanently store security surveillance tapes in the event of accidents, crime or property  damage.
• Document claim activity with an incident report to preserve a record of the event.
• Identify potential areas of concern such as sharp edges, improper door operation, ice  and snow or other hazards.
• Maintenance, timely repairs and detailed documentation help mitigate exposure and ensure the personal safety of everyone accessing the facility.
• While a good insurance policy won’t guarantee that you’ll be disaster-free, the security it provides will go a long way towards sleep.

Universal Insurance Facilities, Ltd. offers a comprehensive package of coverages specifically designed to meet the needs of the self-storage industry. For more information, or to get a quick, no-obligation quote, call 800-844-2101; fax (480) 970-6240; e-mail randyt@univins.com; visit www.universalinsuranceltd.com.