California Investigation Makes Self Storage Insurance a Timely Topic

Of up most concern to both storage facility owners and customers is the care of the items placed into storage.  For instance, if a customer requested a climate-controlled unit for a collection of instruments and paintings, they expect to get what they paid for so that their items are not damaged. Sometimes, however, the unthinkable happens and fires break out or thefts occur. That is where insurance comes in and it is one of the most important considerations when running a storage business.

Currently a San Francisco Bay Area storage facility is being investigated for defrauding tenants in regards to insurance. The investigation is ongoing. And last spring, the New York legislature stepped in, offering up a bill that would require storage owners to offer a pay-with-rent insurance policy. The issue of insurance for storage facilities is beginning to pop up in the news. And negative press like the San Francisco incident has prompted a debate in the storage industry as to how to handle insurance for customers.

Ten other states have acted as New York has regarding pay-with-rent insurance policies, including California, Florida, Illinois, Texas, and Washington.  More than 70 percent of storage operators across the nation do not offer tenant insurance. And many that do offer insurance merely hand tenants a brochure that refers them to an insurance company offering tenant insurance.

For the most part, storage facilities handle insurance in one of two ways. They require the tenant to pay and work it into their monthly rent bill, or they provide insurance to the client and factors it into the price.  However, there are a few who provide insurance policies that only cover the physical structure of the storage unit and then advise the customers to look into finding their own insurance. Some storage owners who don’t provide insurance require tenants to put into writing that they will obtain insurance on their own.

Aspects of insurance to consider that are of interest and came up in the New York bill are: disclosing to potential tenants that their homeowner’s insurance may include coverage of items in a  storage unit; allowing tenants to cancel their insurance at any time and receive a pro-rated refund of any premiums; including an agreement in writing from the insurer permitting self storage operators to collect premiums without separating out that are part of the rental income; and itemizing insurance charges separately but not bill them separately.

“Public Storage Controversy in California Reignites Self Storage Insurance Debate.” Inside Self Storage. Nov. 30, 2010.

Robinson, Holly. “New York Legislature Considers Self Storage Insurance Bill.” Self Storage Industry News. April 1, 2010.