Self-storage operators and customers sometimes have misconceptions when it comes to offering renters insurance. Operators do not always understand how these programs work or the benefits they provide to the business, while renters often feel that insurance for their stored items is unnecessary. To help you see the value for both parties, let’s dispel five common misconceptions about renters insurance programs.
Misconception 1: It’s the same as Renters Insurance
Outside of the self-storage industry, the word “tenant” typically refers to someone renting an apartment or commercial space from a landlord. “Renter Insurance” is designed to help protect those who rent an apartment or use a rented space for business purposes.
In the warehouse business, the renter is the person renting a unit. With the concluded rental agreement, the system operator waives any liability for the customer’s stored items. Renter insurance reduces the owner’s liability in the event of loss of a customer’s stored goods. It also provides a mechanism for the tenant to submit a claim for settlement.
Misconception 2: It’s better to insure stored items with homeowners’ or renters’ insurance
There are several reasons why this is simply not true. First, not all self-storage renters have access to homeowners’ or renters’ insurance. Many are in a transitional phase without a fixed address, or do not have the creditworthiness to afford this type of coverage. Renters insurance ensures your renters have access to the coverage they need for their property.
In addition, tenant and homeowner deductibles are often too high to justify filing a claim in the event of a claim. For example, the base deductible for homeowner policies is $250, but people often choose higher deductibles of $500 to $2,500 to lower their monthly premiums. Since many self-storage rental agreements limit customers to storing up to $5,000 worth of goods, renters insurance is often a wiser option.
Finally, many renters insurance programs provide coverage for perils specific to self-storage that are not covered by all homeowner or renter policies. For example, falling objects, building collapses, and the weight of ice, sleet, or snow are not typically covered by homeowners in simple terms. In contrast, these items are all covered by renters insurance regardless of what form of policy a customer has. In addition, select renter insurance programs provide protection against hazards such as rodents, mold and flooding. Some even offer other protections, such as B. Compensation for a replacement rental room or debris removal, as well as coverage for damage incurred in transit within 100 miles of the facility.
Misconception 3: Operators are responsible for filing tenant claims
While facility staff’s help will result in a more thorough and accurate investigation, self-storage operators are not responsible to judge a claim. Here is how the process typically goes through a renters insurance program:
- A tenant discovers a loss and notifies the self-storage operator.
- The operator will direct the renter to notify their insurance administrator in order to make a claim.
- The commissioned expert requests the necessary documents from the operator. An employee at the facility files an incident report and photographs the damaged items.
- The tenant photographs his belongings and provides the necessary documents.
- The expert examines the claim and informs the tenant of the result.
- If the damage is covered, the renter receives a settlement check.
Misconception 4: Renter insurance is the same as a renter protection plan
It’s almost impossible to talk about renter insurance without mentioning renter protection plans, which are a different type of product. Both help restore a self-storage customer to health after a loss, but they differ in two very important areas.
Regulation. Renter insurance is regulated by each state or county’s insurance department, which means self-storage operators must comply with different rules depending on their location. They’re allowed to sell rental insurance to their customers, but that doesn’t mean they can adjust claims. The product administrator handles all claims with licensed adjusters.
In contrast, a protection plan is not considered insurance and is therefore unregulated. However, since each state has different insurance laws and practices, self-storage operators offering a protection plan should be careful with the language they use when selling, describing, and administering the product.
For example, in California, there was a lawsuit from renters who argued their protection plan was insurance. However, because state law defined insurance as “a contract under which one agrees to indemnify another from any loss, damage, or liability arising out of an incidental or unknown event,” the court ruled that protection plans do not Insurance companies are and are therefore not regulated by the same governing bodies.
A similar lawsuit in New Mexico had a different outcome. New Mexico defines insurance as “a contract to which one commits pay or compensate another in respect of losses arising from certain specified contingencies or perils, or to pay or grant, or act as guarantor, a certain amount or determinable benefit relating to identifiable quotas of risk.” As a result, the protection plan in this case was considered insurance and a Fine imposed on the operator.
Liability. Self-storage operators have long and hard fought to differentiate themselves from warehouse clerks, arguing that they have no care, custody and control over a person’s belongings while they are stored in their unit. They fought effectively and won the right to remove liability from the facility and put it on the tenant once their items were stored. Renter insurance allows operators to maintain this liability waiver while providing customers with coverage should damage occur. The arrangement allows both parties to go home satisfied.
As part of a protection plan, operators agree to retain some liability for a tenant’s property in exchange for additional “rent”. Because of this, they are to some extent responsible for resolving a tenant claim.
Misconception 5: The cost of starting a renters insurance program isn’t worth it
On the contrary, there really is no outlay for self-storage operators to start administering a renters insurance program. With no initial investment other than royalties, the revenue generated is pure profit. Let’s look at a few ways you can benefit from it.
Revenue. Renter insurance generates ancillary income for a self-storage business by giving back part of the premium collected to the operator. The amount you receive may vary depending on the program and several factors:
- The number of facilities you have
- The states in which you operate
- Whether you already manage renters insurance or protection and your claims history
- The coverage options you offer
- Whether you take a risk if a loss occurs
Protection against recourse. After a loss, self-storage renters typically do not treat facility staff with patience and compassion. Instead, they are often upset, frustrated, stressed, or angry. To whom they direct these emotions depends entirely on the type of program you have. With renters insurance, you can apologize for the damage and immediately escalate it to your manager.
With most renter insurance programs, the renter is cared for by a licensed adjuster who is trained to deal with people who have suffered a loss. Tenants who are happy with their billing and their appraiser’s experience typically don’t direct their negativity toward the self-storage business. In many cases, they will probably continue to rent at that location.
If an adjuster cannot satisfy a claim, the customer may file a complaint with your state’s Department of Insurance or the Better Business Bureau. You can even remedy the situation with a small claims lawsuit. In these cases, your program administrator should handle these complaints for you so that you can focus on your business.
risk mitigation. Renters insurance administrators can also provide you with information to help you mitigate future risks. Work with a provider who will review past losses and help you take steps to prevent similar incidents from happening again. Not only does this limit future claims, but your proactive actions show tenants that you care about them and their property.
attention. Similarly, good renters insurance administrators will provide assistance to ensure you comply with all applicable state laws. Regulations are constantly evolving, so most vendors have a team dedicated to tracking changes and staying abreast of government requirements.
Offering renters insurance is much more than just helping customers get coverage for their belongings. Partnering with a reputable provider will help you support day-to-day business operations, generate ancillary revenue and protect yourself from liability and recourse, while also helping your self-storage customers protect themselves from the unexpected.
Brynn Lee is communications director at Indianapolis-based Xercor Insurance Services, a renter’s insurance agency serving the self-storage industry. In her role, she oversees all strategic and internal communications initiatives. To reach them, contact [email protected].