Randy Tipton, president of Universal Insurance Facilities (www.univins.com) in Phoenix, understands firsthand why self-storage facilities have caught on with so many Sunbelt residents and made her insurance niche a lucrative one. She once lived in Syracuse, N.Y., where houses have basements and attics for all the excess stuff people accumulate. Sunbelt homes typically do not have basements or attics, yet people still need someplace to put all the stuff. That helps explain the boom in self-storage.
“It’s everywhere but you see more doors in Sunbelt states like Arizona and Florida where people are moving to,” suggests Tipton, whose independent agency sells an insurance program designed for self-storage facilities.
The self-storage industry has blossomed everywhere. According to the Self-Storage Association, there more than 45,000 primary self-storage facilities in the country. They average revenue of more than $400,000 a year and represent more than 2 billion square feet devoted to storage—an area three times the size of Manhattan.
While the industry has grown fast over the past decade, it’s not done. It is still adding thousands of new facilities each year—2,862 new facilities in 2005, according to SSA.
More than half of the facilities are owned by small businesses that run just one facility. However, as the industry grows, the ownership profile is also changing. “Years ago it was more of a Mom & Poop business” says Tipton. “We like that. But it’s getting pretty sophisticated now. Wall Street has discovered our sleepy industry. It’s a pretty cash-rich businesses.”
Insureds now own from one or a couple of sites up to hundreds. In Titpton’s experience, the typical owner hass 5 to 10 facilities within a region. Larger operators with 40-50 buildings spread out across more states.
She estimates that a typical premium is about $5,000. Premiums go up for facilities if they are far from fire protection, have wood construction or are located in wind areas such as the Gulf states, where Tipton says coverage is almost impossible to get these days. Sprinkler systems and the gauge of the metal used in construction also affect insurance costs.
Tipton cautions independent agents who might want to write a self-storage facility to learn about the industry first. Agents may be tempted to just put them on a regular Business Owners Policy (BOP) but “that’s not right,” because self-storage facilities have several unique characteristics.
Most states have laws defining self-storage facilities as properties with individual storage spaces that are rented to occupants who have access to them for storing and retrieving personal property. While self-storage operators are landlords, they differ from warehousemen and other landlords in one major respect. They do not take custody or control of the goods stored in their facility. Their tenants store their goods at their own risk. Tenants provide their own access and security to their units through their own locks.
Tipton always checks the lease an operator uses to verify that it clarifies that the landlord is not responsible for the goods being stored.
Special coverages
Despite the lease wording, the self-storage operator is not completely immune from claims or lawsuits. Thus specialized Customers’ Goods Legal Liability covers the owner for damages to property caused by negligence, such as when a leaky roof caused by poor building maintenance leads to damage to a tenant’s property. Customers’ Goods Legal Liability also provides for defense costs.
Sale and Disposal Legal Liability covers another unique exposure area for self-storage facility owners. Most states have lien laws governing how an operator is supposed to handle delinquent tenants. There are rules for when an operator may lock out a tenant who has not paid rent and how to go about reselling the stored property. Mistakes in properly adhering to the rules—as simple as misspelling the tenant’s name on a notice or as serious as locking out the wrong tenant and selling the wrong goods—expose owners to claims.
Since the storage facility isn’t responsible, many facilities offer tenants the option of purchasing their own Customer Storage Insurance. In addition, typical liability coverages provide for general business liability, personal injury and advertising liability, and hired auto and non-owned auto liability.
Property coverages for self-storage facilities insure the buildings and business personal property, loss of income and employee dishonesty.
“I am surprised because some people still will say they do not need property insurance because their buildings are metal,” says Tipton. Fire is the most common cause of property loss, in her experience, followed by wind and hail.
Some optional coverages address employee personal property or exterior signs and increased limits may be be purchased for computer records, fences or landscaping.
Program providers
Tipton’s agency sells a program offered by Deans & Homer (www.deanshomer.com), a San Francisco underwriting manager.
MiniCo (www.minico.com) is a well-known program manager with expertise in the self-storage industry. Safeco underwrites the MiniCo program. MiniCo’s Web site is chock full of information on the industry.
Insurers belonging to Insurance Services Office (www.iso.com) have access to ISO’s Market Segment Program For Self-Storage Facilities which offers policy forms, rules, and loss costs for companies in the warehouses and mini-warehouses classification.
Where to learn more
Trade Associations
Self-Storage Association
1900 North Beauregard Street, Suite 110
Alexandria, VA 22311
Phone: 703-575-8000
Fax: 703-575-8901
www.selfstorage.org
Publications:
Mini-Storage Messenger
www.ministoragemessenger.com/
Inside Self Storage
http://www.insideselfstorage.com/
Topics Property
Was this article valuable?
Here are more articles you may enjoy.
California Chiropractor Sentenced to 54 Years for $150M Workers’ Comp Scheme 
Uncertainty Keeps Prices Up; No Prior-Year Loss Development: Travelers 
Cargo Owners in Baltimore Disaster Face ‘General Average’ Loss Sharing, MSC Says 
Dubai Floods Expose Weaknesses to a Rapidly Changing Climate From This Issue
