Essential Protection: Storage Insurance Is Vital For Operators AND Customers

‘Storage insurance’ provides essential protection to both operators, as well as customers. Lorenz Wagener, co-founder of KingKho Mini Storage, discusses the importance, benefits, and types of coverage storage insurance typically includes.

Every Self-Storage Operator Needs To Offer Storage Insurance

Image by Sarla Wu, Pixabay

Most self-storage operators purchase the following two basic insurances for their own facility:

1/ Property Insurance that protects against damages caused by fires, floods, earthquakes and more.

2/ Employee Liability Insurance that protects your company from claims by third parties in the event that one of your employees caused any sort of damage or, God forbid, injury.

The key element to understand is these types of insurance typically only cover harm to your building, your company and its assets, but not your customers’ items in their respective storage units!

This makes a strong case for why operators need to make it possible for customers to take out extra storage insurance. This can either happen via a standard agreement, covering a minimum lump sum amount, or via a custom sum insured and premium, depending on how much the customer’s goods are worth. 

Fires & Floods May Hit Your Storage Facility Anytime

If, for example, a lightning strike causes a fire and your entire storage building burns down, your property insurance should cover your cost of re-building a new storage facility. However, it will not cover the contents of hundreds of your customers.

Sometimes, the contents stored by customers have little monetary value and are replaceable. But customers also often store items with sentimental value or even their entire household. In addition to customers' material and sentimental loss, your company could suffer reputational loss as accusations of insufficient care proliferate as people look for someone to blame. 

Protecting Customers Through Extra Insurance

Your storage insurance plan for your customers should cover two critically-important parts:

1/ Property Insurance For Your Customers’ Goods

Mini storage insurance plans should ideally cover the damages caused by perils such as natural disasters including (but not limited to):

• Floods, 

• Storms, 

• Earthquakes, 

• Fires, or

• Lighting strikes.

 This can also cover man-made incidents such as:

• Robbery or theft,

• Wilful damages, or

• Arson.

Depending on the region your storage facility is located in, the perils representing typically the biggest risks are flooding and fire.  While flooding may arise from inclement weather, it is more likely to be inflicted from a man-made source, like the bursting of water pipes or malfunctioning sprinkler systems.

But…Not Everything is Covered

Most insurance companies do not provide coverage for damage caused by:

- Wear & tear,

- Intentional loss,

- Ant, termite, or other insect infestation,

- Rodents, mice, rats damage including droppings,

- Mold or mildew, or

- Neglect.

Image by Sala Wu, Pixabay

2/ Public Liability Insurance If A Customer Causes Damages

The second important part is offering storage insurance including public liability coverage. 

If, during a move-in for example, your customer Pete accidentally:

A) Damages another customers’ property or goods,

B) Damages an automobile in the parking lot,  

C) Injures another customer,

then it is important for Pete to have a public liability insurance to cover any resulting compensation and legal fees. Note the above three examples are not exhaustive; other cases of injury or property damage could exist.

Public liability insurance typically covers the following potential liabilities of your customers:

• Compensation claims requested by 3rd parties for damage to property (some customers store expensive wines, paintings or other sensitive goods) 

• Legal fees, if, for example, Lily sues Pete for damaging her sports car, oil painting, or other property.

• Third party claims for injury.

With the above two insurance plans, your storage customers obtain essential protection against potential worst-case scenarios. 

Should All Customers Get Storage Insurance?

In short, yes. Regardless if your customer is the owner of a small business, an individual customer or a family, the recommendation to all three is to get storage insurance. 

Having their items and unintended mishaps covered, will provide them, as well as you as the operator, with priceless peace of mind.

Does The Storage Operator Need To Bear Any Costs?

In most cases, storage insurance is paid by the storage customer, as it is the customer’s items or mishaps that are getting insured. 

To the storage operator, usually no costs arise other than the initial time and resources to find the right insurance partner, train staff and keep proper records of customer sign up.

In most cases, you as the operator of the storage facility can even make a small commission on each sale, for example you charge $1 US to your storage customer per month, whereby you only need to pass on $0.80 US to the insurer. However, operators need to ensure that the programme is structured so the insurance company is completing the sale and administers the programme so operators don’t stray into performing regulated activities as proscribed by local insurance regulatory authorities.

Experienced operators share their tips

PRO-TIP #1:

Ask your tax advisor or local insurance regulator if you may put an item called “insurance” onto your invoices to ensure legal compliance.

PRO-TIP #2:

Check with your lawyer if you may add a margin in addition to the actual insurance fee, or if there are any laws preventing this. 

How Much Does Storage Insurance Cost?

To the customer buying storage insurance, the fees in relation to the sum insured are often negligible. Insurance companies, in established markets like the U.S., UK or Australia, usually have standard offers. In pioneering markets like Vietnam or Thailand, you might have to engage with multiple insurance companies to find one that is willing to cooperate with you.

The premium is often less than 0.2% of the sum insured. For example, if a unit has a sum insured for $10,000 US, the required premium can be as low as $20 US/year or $1.67 US/month. Some insurers accept customers to pay by the month, others request to be paid upfront in one go. 

About The Author

Lorenz Wagener, Co-founder & Director, KingKho

Lorenz Wagener is a co-founder and Director of KingKho Mini Storage, Vietnam’s first mini storage company. Having first-hand discussed the topic of ‘storage insurance’ with more than ten insurance companies in Asia, gave Lorenz a good overview of what offers are out there, what is important, and what to look for. You can find Lorenz on Linkedin, or on KingKho.com. He’s open and approachable and can help people with their storage related questions in Vietnam, in particular in the Hanoi region.