Think back to when self-storage was just a collection of metal buildings on the edge of town with units people could rent to stash the stuff that didn’t fit in their garages. No frills. No climate control. And certainly no high-tech security. Fast-forward to today, and the global self-storage industry is on track to surpass $83 billion by 2030. That success has been accompanied by multiple layers of risk complexity: more customers, more (and more valuable) items being stored, and more exposure for operators. As a result, self-storage insurance options have evolved with the industry’s growth.
The First Step: Tenant Insurance
In the beginning, insurance programs for storage tenants were basic but nonetheless groundbreaking. In 1974, MiniCo became the first provider to introduce tenant insurance – an insurance product designed specifically for the self-storage industry, which gave tenants a way to cover their belongings against multiple perils.
These early programs were deliberately simple:
- Facilities that elected to offer tenant insurance and met the required underwriting guidelines were provided with brochures and applications.
- The facility provided tenants a brochure at the time of leasing.
- Tenants paid monthly premiums directly to the insurance provider.
- The insurer, not the facility, handled claims.
For operators, the major benefit was protection against liability. By definition, self-storage businesses are not responsible for insuring the items that tenants store in their rented spaces. However, that doesn’t prevent tenants from attempting to make a claim (or file a lawsuit) against the facility in the event of loss or damage.
The vanguard MiniCo tenant insurance program incorporated a tenant responsibility addendum in the brochure. As part of the leasing process, the facility would present the insurance brochure and ask the tenant to complete and sign the addendum indicating their decision to purchase insurance – or not. The signed addendum was then included as part of the rental contract. The signed tenant responsibility addendum quickly became accepted by courts around the country as proof that the business had informed tenants that they needed to insure their own belongings, had presented the tenant with information about an insurance solution, and had recorded the tenant’s decision to opt out of purchasing insurance.
Integrating with Operations: Pay-With-Rent (PWR) Insurance
As property management software for self-storage facilities was introduced and became the standard for the booming self-storage sector, new opportunities for streamlining operational tasks were identified. One of these tasks was offering tenant insurance, and facility owners wondered, “Why not integrate the tenant insurance application into the platform that’s already generating and managing rental contracts?”
MiniCo was at the forefront of developing the next phase of tenant insurance: pay-with-rent (PWR) insurance. In the PWR model, the facility agrees to do more administrative work to invoice insurance premiums along with monthly unit rental fees, collect the premiums, and track tenant payment activity. The facility then sends a detailed monthly report to MiniCo along with the premium collected, minus a contractually agreed-upon administrative fee for the business’s efforts. As with the original tenant insurance model, claims are reported to and handled by MiniCo.
The benefits of the PWR model are multifold:
- Tenant insurance is offered as part of every rental process, eliminating human error in remembering to hand a customer a brochure.
- Participation in the tenant insurance program tends to be much higher, which translates into broader liability protection for the facility.
- Facilities are able to modify rental contracts to require participation in the tenant insurance program.
- Facility owners have access to an additional revenue stream in exchange for doing a small amount of administrative work.
For business owners and insurance providers, the PWR model was an exciting turning point in terms of increased liability protection for facilities, marked growth in tenant participation and premium collected, additional income for businesses, and enhanced customer service for tenants.
The Next Evolution: Tenant Protection Plans
The most recent evolution in tenant insurance solutions is the self-storage tenant protection plan model, which takes a very different approach. First, the facility owner purchases a Contractual Liability Insurance Policy (CLIP) either directly from an insurance provider or via a licensed retail insurance agent. The self-storage business then offers tenants a protection plan – an agreement that the facility will reimburse tenants up to a selected coverage level (typically in the range of $2,000 to $5,000) for losses due to perils spelled out in the plan in exchange for a monthly participation fee paid by the tenant. The business then makes a claim against the CLIP for reimbursement, subject to the terms and limitations of the insurance contract.
The key differentiator with tenant protection plans is flexibility. Traditional tenant insurance programs are admitted insurance policies filed with state departments of insurance. Protection plans are different:
- No limited lines insurance license is required for the facility.
- Operators are free to set their own monthly participation fee (typically $12 to $25) that is added to the tenant’s rent.
- No required integration with facility management software.
- API integration with management software platforms that eliminates the need for managers to submit monthly reports.
- Potential for increased income and decreased losses due to claims.
MiniCo’s exclusive Self-Storage Tenant Protection Plan offers an additional benefit: business owners have access to dedicated underwriting and claims support from MiniCo’s experienced in-house professionals.
MiniCo’s Role in Shaping the Industry
Since the earliest days of the self-storage industry, MiniCo has been the leading innovator in developing insurance solutions for business owners and their tenants. MiniCo recognizes the important role that retail insurance agents play in advising clients and contributing to the financial stability of their businesses. We invite you to contact us to learn about the singular opportunity you have with MiniCo to offer our Self-Storage Tenant Protection Plan to your self-storage clients. Contact our team today!
