Self-storage operators and customers sometimes have the wrong notions about renters insurance offerings. Operators don’t always understand how these programs work or the benefits they provide to the business, while renters often believe that insurance is not necessary for their stored belongings. To help you see the value for both parties, let’s take a look at 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” generally refers to someone who rents an apartment or commercial space from a landlord. “Renters insurance” is designed to help protect those who rent a home or use rented space for business purposes.

In the storage business, the lessee is the person who rents a unit. Through the signed rental agreement, the operator of the facility disclaims all responsibility for the client’s stored belongings. Renter’s insurance reduces a property owner’s liability exposure in the event of loss of a customer’s stored property. It also provides a mechanism for the lessee to file a settlement claim.

Misconception 2: It’s better to insure stored items through 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 transition state without a permanent address or do not have the credit history to pay for this type of coverage. Renters insurance ensures that your renters have access to the coverage they need for their belongings.

Also, homeowners and renters insurance deductibles are often too high to justify filing a claim if damage occurs. For example, the basic deductible for homeowners policies is $250, but people often choose higher deductibles, from $500 to $2,500, to lower their monthly premiums. Considering that many self-storage rental agreements restrict customers from storing up to $5,000 worth of goods, renters insurance is often the smarter choice.

Finally, many renters insurance programs offer coverage for perils that are specific to self-storage but are not covered by all homeowners or renters policies. For example, falling objects, collapsing buildings, and the weight of ice, sleet, or snow are typically not covered by basic homeowners policies. Rather, all of these items are covered by renters insurance, no matter what type of policy the customer has. Additionally, certain renters insurance programs offer coverage against perils such as rodents, mold, and flooding. Some even offer other protections, like compensation for a replacement rental space or debris removal, as well as coverage for damage sustained in transit within 100 miles of the facility.

Misconception 3: Operators are responsible for filing tenant claims

While assistance from facility personnel will result in a more thorough and accurate investigation, self-storage operators are not responsible for award a claim. Here’s how the process typically goes through a renters insurance program:

• A tenant discovers a loss and notifies the self-storage operator.
• The operator instructs the tenant to notify their insurance administrator to file a claim.
• The assigned adjuster requests all the necessary documents from the operator. A facility staff member files an incident report and photographs damaged items.
• The tenant photographs his belongings and provides the necessary documents.
• The adjuster investigates the claim and notifies the tenant of the outcome.
• If the loss is covered, the tenant receives a settlement check.

Misconception 4: Renters insurance is the same as a renters protection plan

It’s almost impossible to talk about renters insurance without mentioning renters protection plans, which are a different type of product. Both help a self-storage customer recover after a loss, but they are different in two very important areas.

Regulation. Renter’s insurance is regulated by each state’s or district’s insurance department, which means self-storage operators must comply with different rules depending on their location. They are licensed to sell renters insurance to their customers, but that does not mean they can adjust claims. The Product Manager handles all claims with licensed adjusters.

In contrast, a protection plan is not considered safe and is therefore not regulated. However, because each state has different insurance laws and practices, self-storage operators who offer a protection plan should be careful about the language they use when selling, describing, and managing the product.

For example, there was a lawsuit in California filed by renters who argued that their protection plan was insurance. However, because the state statute defined insurance as “a contract whereby one agrees to indemnify another for loss, damage, or liability arising out of an unknown or contingent event,” the court ruled that protection plans they are not safe and therefore are not regulated by the same governing bodies.

A similar lawsuit in New Mexico had a different result. New Mexico defines insurance as “a contract by which one agrees to pay or indemnify another as to the loss of certain specified contingencies or perils, or to pay or grant a specified amount or determinable benefit in connection with determinable risk contingencies, or to act as collateral”. As a result, the protection plan in this case was considered insurance and the operator was fined.

Responsibility. Self-storage operators long struggled to distinguish themselves from the warehouseman by arguing that they did not have care, custody, and control of a person’s belongings while they were stored in their unit. They effectively fought and won the right to remove liability from the facility and assign it to the tenant once their items were stored. Renters insurance allows operators to retain that liability waiver while providing customers with coverage should a loss occur. The arrangement allows both parties to leave satisfied.

Under a protection plan, operators agree to retain some responsibility for a tenant’s belongings in exchange for additional “rent.” Because of this, they are responsible for the resolution of a tenant’s claim to a certain extent.

Misconception 5: The cost of starting a renters insurance program is not worth it

By contrast, self-storage operators don’t really have to pay out-of-pocket costs to start managing a renters insurance program. With no initial investment other than license fees, the revenue generated is pure profit. Let’s look at some of the ways you can benefit.

Revenue. Renters insurance generates supplemental revenue for a self-storage business by redistributing a portion of the premium collected to the operator. The amount you receive may differ depending on the program and several factors:

• The number of facilities you have
• The states in which it operates
• If you already manage renters insurance or protection and your loss history
• Coverage options offered
• If you are taking any risk when a loss occurs

Protection against recourse. After suffering a loss, self-storage tenants often do not treat facility staff with patience and compassion. Instead, they are often upset, frustrated, stressed, or angry. Who those emotions are directed at depends entirely on the type of program you have in place. With renters insurance, you can apologize for the loss and immediately direct them to your manager.

In most renters insurance programs, the tenant will receive the attention of a licensed adjuster who is trained to deal with people who have experienced a loss. Tenants who are satisfied with their agreement and the experience with their adjuster generally do not direct negativity toward the self-storage business. In many cases, they are even likely to continue renting at that location.

If an adjuster is unable to satisfy a claim, the client may file a complaint with their state insurance department or the Better Business Bureau. They may even seek relief through a small claims lawsuit. In these cases, your program administrator should handle these complaints for you, allowing you to focus on your business.

Risk mitigation. Renters insurance administrators can also provide information to help you mitigate future risks. Partner with a vendor who will review past losses and help you take steps to prevent similar incidents from happening again. This will not only limit future claims, but your proactivity shows tenants that you care about them and their belongings.

Compliance. Likewise, good renters insurance administrators will provide support to ensure that you comply with all applicable state statutes. Regulations are continually evolving, so most providers have a dedicated team to track changes and stay current on state requirements.

Offering renters insurance is about much more than just helping customers get coverage for their belongings. Partnering with a trusted provider will help support daily business operations, provide supplemental income, and protect against liability and recourse, all while helping your self-storage customers protect themselves from the unexpected.

Brynn Lee is director of communication for Indianapolis-based Xercor Insurance Services, a renters insurance agency serving the self-storage industry. In her role, she oversees all internal communication and strategic initiatives. To reach her, contact [email protected].