May 31, 2024

Many self-storage customers are unaware that their stored belongings aren’t automatically covered against damage or loss. It’s important for facility operators to explain the need for coverage and offer a solution like a protection plan.

Customers are usually unaware that their valuables aren’t automatically insured while stored at a self-storage facility, so it’s imperative that the site manager inform them of the need for coverage and their options to secure it. Most rental agreements state the tenant is solely responsible for loss or damage sustained to their personal property, but they might easily miss this information. It’s up to the manager to emphasize it. If they don’t and a loss were to occur, the renter might feel they’ve been misled. The last thing you need is for a customer to turn into a “social media assassin” and trash your business reputation!

This is why, in addition to disclosing your facility’s coverage requirements, you should offer options for protecting stored goods. A tenant-protection plan is an excellent solution. Courts in California and other states have ruled that this is not insurance. It’s a three-party agreement in which the tenant and facility operator are the first and second parties.

The renter contracts with the operator through a signed lease addendum. In consideration for an additional fee per month, the operator agrees to shield the tenant from property damage or loss, within specified limits.

The third party is added when the self-storage owner purchases a contractual liability-insurance policy that assumes any obligation to the tenant. This is a “reinsurance” agreement. The third-party provider receives a portion of the administrative fees.

If the tenant suffer a loss, the owner becomes legally responsible only if they’re proven to be negligent or they breach some other duty to the tenant.

Unlike with tenant insurance, self-storage operators offering protection plans aren’t required to be licensed, and fingerprinting isn’t required. The agent selling the contractual liability-insurance policy is the one who must be licensed.

In terms of coverage, a tenant-protection plan generally covers a self-storage customer’s property loss due to burglary as well as damage from fire, water, and natural disasters. The plan can also provide coverage for mold, mildew, and rodent damage. Limits are typically $2,000 to $10,000 per tenant.

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