While the self-storage business is fairly simple, the things that come with it aren’t always cut and dried. For example, it’s critical for owners to have the right insurance coverages to meet their specific needs, but standard commercial policies can have gaps that leave you and your business vulnerable.
When you hear terms like “specialized services” or “specialized coverages,” expensive probably comes to mind. The good news is this doesn’t have to be the case when it comes to self-storage insurance. In our industry, specialty products can be affordable because the coverages limit risk without forcing you to waste money on things you don’t need.
All businesses have distinct exposures and risks. The things that make a self-storage business unique are also the reasons you need specialized insurance. Below are some of the coverages tailored to meet your needs and maximize protection of your investment.
Well-Known Coverages
Most commercial business owners are aware of building and personal-property insurance coverages. These are essential for any property-related claims that may arise, such as a fire caused by faulty wiring or a car crashing though your fence or gate.
When purchasing this coverage, owners should look for a policy that includes replacement cost vs. actual cash value. Replacement cost doesn’t take depreciation into consideration when valuing a claim. This makes indemnifying and getting your property back up and running quicker and more efficient. You may also want to look for the ability to have blanket coverage on buildings, which gives you a little more flexibility.
Another well-known coverage is commercial business liability. This covers exposures that arise from bodily injury or property damage at your facility. The biggest (and perhaps most common) types of claims in this category are trip-and-fall injuries. Having the correct limit in place will help you avoid paying the large sums that can be associated with these incidents.
The above coverages are extremely important to most commercial businesses and required when working with a bank or lender; but there are other familiar policies you may need, such as workers’ compensation. If you have employees, this coverage is vital in case one of them is injured during work hours or while on site. States may have different requirements and regulations related to workers’ comp, so consult with your insurance agent to determine the best coverage for you.
Lesser Known Coverages
There are other insurance coverages that are just as vital for a self-storage business but are sometimes overlooked. These are specific to the industry.
Customer goods legal liability (CGLL). This provides coverage for claims that arise from damage to or loss of tenant stored property. Though storage operators aren’t responsible for the contents of a tenant’s unit (this should be clearly stated in your rental agreement, along with a requirement that customers provide their own insurance), unfortunately, situations can occur that create some legal liability and trigger claims. An example would be if a tenant’s goods are damaged due to owner negligence. CGLL can cover such claims as well as the related legal costs, even if a claim is determined to be false or groundless.
Sale and disposal liability (SDL). Sooner or later, every self-storage owner will be faced with the unenviable task of evicting a tenant for failure to pay rent, reclaiming the space, and removing or disposing of the property. SDL coverage provides protection against the act of wrongfully removing, selling or disposing of a customer’s goods. If state lien laws aren’t followed, the facility operator is vulnerable to claims. If you or your staff are involved in the sale and disposal process, you must be aware of your state’s laws.
SDL insurance isn’t normally available through regular business insurance carriers, but it can be secured through insurers that specialize in self-storage. The cost is typically reasonable for the peace of mind and protection you receive.
Pollution liability (PL). Did you know most standard insurance policies exclude various types of pollution exposures? They may include a small pollution-cleanup sublimit, but the circumstances for this to kick in and cover a claim are very restricted and typically don’t even cover an actual pollution-related event! This creates large coverage gaps that leave owners vulnerable to the huge costs that can be associated with a pollution accident.
A standalone PL policy can cover these gaps and provide peace of mind when facing a pollution-related loss. Leaking RVs or other stored automobiles, illegally stored substances, toxic chemicals, and oil drums are just a few of the common items that could lead to an expensive, catastrophic event. Strongly consider adding this coverage to your insurance portfolio.
These are just a few of the coverages that are essential for self-storage. When shopping for insurance, consider working with a specialist who can provide a custom-tailored policy. By working with agents and carriers who focus on the industry, you’ll be able to build a strong package that suits your facility’s needs.
Accidents can and do happen, even to the most conscious and diligent owners. Having the right coverages in place is step one in protecting yourself and your business. The cost of one accident or claim can easily outweigh the cost of an insurance premium—sometimes years of premiums! Don’t get caught without the best coverages for your unique operation.
Melanie Wichelman is an account executive with Universal Insurance Programs, which has created and provided specialized insurance coverages to the self-storage industry for more than 20 years. For more information, call 800.844.2101; visit www.universalinsuranceltd.com.
