Customer Storage Insurance

To Good to Be True?

By Alice Cravens

It helps you even if no one buys it.

It helps you to serve your customer while clarifying responsibilities.

It helps you to reassure customers if a catastrophe strikes.

It costs you little...or nothing.

Does this sound too good to be true? Can you believe that this is a form of insurance? Customer storage insurance programs can do all of this for a storage manager. While this type of insurance has been around for decades, today's programs have brought us into a new era of improved coverages and services that help to make them more attractive to customers. This article will give you a comprehensive update on this important service, from covering the basics to tips on how to incorporate this service into your daily leasing activities.

THE BASICS

What is Customer Storage Insurance?

When customers store their belongings at your facility, they may be concerned about what would happen in case of fire, burglary or other catastrophes. A customer storage insurance policy commonly offers protection against several different types of damage to the customer's property, including fire, windstorms, burglary, and water damage due to roof leak and collision. It is usually offered right at the facility, the most natural place to obtain this small and often short-term policy.

Depending on the program, available coverage limits can range from $2,000 to $30,000, with policy terms ranging from one month to one year. The facility can also choose, in many cases, between offering a program where the customer mails the insurance application and premium payment directly to the insurance provider, or one in which the customer pays the insurance premium to the storage facility along with the rent for the storage space. When customers pay for the insurance with their rent, coverage starts automatically when they move into their storage units. The manager forwards the collected premiums to the insurance company at the end of every month.

Why include this service with everything else you do? Customer service insurance helps you to serve your customers' needs and offer reassurance. Documentation enables you to keep a written record showing that you reminded customers of their responsibility for their stored belongings in a service-oriented way. Catastrophe assistance eases the burden of telling your customers that they have been affected by a catastrophe when you can refer them to an insurance provider. Offering a program at your facility: Most of the insurance carriers specializing in the self-storage industry offer a variety of customer storage insurance programs. No two programs are exactly alike in coverage and administration, so compare them and see which best suits your needs and your customers' needs. Coverage differences, limits, costs and payment terms can affect your customers' buying decision. The program materials that you will need in order to make this insurance available to your customers are usually supplied to you at no charge. However, some companies may charge shipping fees. Most insurance companies limit the availability of their programs because they must manage costs and catastrophe exposure and comply with the applicable insurance regulations in each state. You may want to find out which laws apply in your area and what qualifications or limitations are imposed by the programs that interest you.

How did Customer Storage Insurance develop?

Customer storage insurance developed out of the needs experienced by both the storage facility operator and the customer. Managers found that customers often confused the self-storage business with the moving and storage business. A moving and storage company acts as a bailee, and usually takes charge of the property. It may, therefore, be responsible for the safety of the property. A typical self-storage facility does not usually have any control over the stored property. It leases space to tenants just as a commercial building owner does. Managers needed a way to actively show the customer that the facility was not responsible for stored property.

At the same time, customers needed a way to get insurance for their stored belongings easily and inexpensively. Some homeowners policies may provide coverage for property in storage facilities, however, many provide limited or no coverage. When insurance is available right at the facility's counter, customers can be asked to sign a form: 1) documenting that the facility offered this extra service; 2) reminding the customer of his or her own responsibility for the stored property; and 3) allowing the customer to easily obtain insurance coverage.

Many storage managers offer some kind of customer storage insurance, because it allows them to clearly show the customer in a service-oriented way that the facility is not responsible for stored property. It is also offered because it enables managers to keep a written record that they took this extra step to assist their customers. This extra documentation is often contained in the materials supplied by the insurance provider. Here is an example of the wording you might see that walks the customer through these important concepts:

Tenants Store Property at Their Own Risk I understand that this self-storage facility and/or its management: 1) is a landlord renting space, is not a warehouseman, and does not take custody of my property; 2) is not responsible for loss or damage to my property; 3) does not provide insurance on my property for me; and 4) requires that I provide my own insurance coverage or personally assume risk of loss or damage. Tenants Choice of Insurance Options I have been given a brochure that explains the customer storage insurance available here. As initialed below, I agree to obtain insurance coverage on property in my storage space for its actual cash value or personally assume risk of loss or damage. ________Please initial only one: ________Customer storage insurance policy ________From my own insurance agent ________Personally assume risk of loss or damage Tenant's Signature_________________________

What kind of storage situations is customer storage insurance designed for?

Most customer storage insurance programs are designed to cover property stored in enclosed locked spaces. Many of these programs were originally created to insure household goods. Look for policy limitations on business property if you have many business clients. Most policies exclude or severely limit coverage for property stored in the open because of the increased exposure. Check your insurance program to see how it treats property stored in outside storage spaces, and suggest to your customers who store boats or cars that they consult with a local auto or water-craft insurance agent because of these restrictions.

Customer storage insurance programs may also not fit other less traditional selfstorage situations. A good example is when a majority of a storage facility's business is in active business records storage. Because the goods move in and out of the facility more frequently, the responsibility for these records can shift - you are no longer in the traditional "tenant leasing storage space" situation. These records are often not covered by the standard customer storage insurance policy because of the number of records and the difficulty of placing a value on them. This situation is often handled by a special agreement between the management and the customer.

In the last few years, storage facilities have also provided additional services. These may include the use of a moving truck or pick-up and transportation of the customers' belongings. Customer storage insurance policies usually do not take effect until the belongings are in the selected storage space, so the current customer insurance programs may still be offered. Keep in mind that your responsibilities may change when you provide additional services. It is important to check with your insurance providers and your attorney about any special agreements needed whenever your services differ from traditional self storage.

The newest service in the storage industry is one that (for lack of an official term) we'll call "portable self-storage." The self-storage company delivers specialized containers to the customer and then picks them up after the customer packs them. This presents a new challenge to customer storage insurance providers. While there is increased protection from water and crime for these belongings, they also move about under the facility's care, creating a new type of risk for "space-based" customer storage insurance policies. This type of service can affect other parts of the business, because it pushes it closer to the moving and storage industry with another world of laws, responsibilities and liabilities. This can affect a storage facility's ability to offer a separate customer storage insurance program for portable self-storage situations. Perhaps new customer storage insurance products and services can be created if the portable self-storage concept grows and manages to remain free of the laws that regulate the moving and storage industry.

Why offer such a program?

Customer storage insurance programs offer benefits for you and for your customers. They provide you with the opportunity to explain that your facility is not responsible for customers' property and to document that explanation. At the same time, you are able to offer the customers a low cost way to protect their stored belongings. Even if no one chooses to purchase the insurance, the written documentation becomes an important part of your business records if a question arises at a later date.

It is clearly to your customers' benefit to be able to purchase this type of protection for their stored property. In the unfortunate event of a catastrophe, such as a fire or a hurricane, the presence of a customer storage insurance program helps you, as well. Imagine how it would ease the burden of telling your customers about a major disaster if you could also reassure them by referring them to an insurance provider. Your ability to provide caring customer service is enhanced by these programs.

THE OFFER

Now that you have a program, how and when do you offer it to your customers?

Insurance Phobia - we all have it. Few managers are eager to talk about insurance, unless they have seen first-hand how it can benefit customers when a catastrophe strikes. Your managers want to emphasize the benefits of storing property at your facility and might shy away from suggesting that something bad could happen to their stored belongings. But customers will value your foresight and concern, especially when your facility offers a service that can help them if an unfortunate event happens. Here are some tips to help you showcase this service:

1) All insurance providers emphasize service to you and your customer. They provide toll-free numbers and support materials to answer questions about coverage, administration and claims. Make sure that your new manager becomes familiar with the program you provide.

2) Let your customer know that your facility took the time to find a program so that you could offer this additional service to them.

3) While you manage your facility carefully, situations like hurricanes, earthquakes, and even fires and targeted burglary are beyond your control.

4) If customers say that their homeowner's policy covers property stored elsewhere, that's great. They may want to double check with their insurance agent to make sure that there are no limitations on coverage.

5) Your customers are spending a great deal of effort to care for their property by storing it at your facility. Making sure that their property is protected from catastrophes rounds out this care.

THE FUTURE

Customer storage insurance programs are changing for a variety of reasons, thanks mostly to improvements in technology. Facilities are also being built stronger and safer, and this reduces the insurance risk. For example, improvements in security have motivated insurers to offer better crime coverages. Burglary coverage used to exist only as a partial coverage, usually only 50 percent of the total limit chosen. A customer might now be able to purchase full burglary coverage or even theft coverage, where forcible signs of entry are not required to demonstrate a covered loss. Computerization has also helped with payment options and it assists the insurance providers in determining coverage and handling catastrophe losses efficiently. And as for portable self-storage, insurance providers always enjoy a new challenge.

While these improvements are welcome, it will be a long time in many states before insurance can be purchased as quickly as locks or storage materials. Customer storage insurance is a different animal from other ancillary services, primarily because it is regulated by each state with its own specific preferences. In fact, many states rely on regulations based on how insurance was transacted generations ago before fax machines, readily available computers or even telephones and regulators face the daunting challenge of questioning what is truly necessary and what if anything needs to change.

Still, the need for customer storage insurance remains. There are no alternatives in the traditional insurance market, and that is unlikely to change. The future of customer storage insurance as an enhancement to service for the manager and customer will continue to brighten.

Alice Cravens manages a variety of customer service programs for Deans and Homer, an underwriting manager in business since 1856. Deans and Homer is one of the founding insurance providers for the self-storage industry, and offers comprehensive insurance coverage for facilities as well as a variety of customer storage insurance programs. Ms. Cravens may be reached at (800) 548-1616, or email: www.deans-homer.com.