Insurance For Your Property in Storage

Too much stuff? Almost 9 percent of American households rented a self-storage unit in 2012, up from 6 percent in 1995. Before joining them, be aware that you, as the lessee, remain responsible for loss or damage to everything in your unit, unless your rental agreement specifies otherwise.

The contents coverage section (Coverage C) of your homeowners policy protects your personal belongings, no matter where they’re located. The typical policy provides between 50 and 70 percent of the policy’s dwelling limits in coverage for personal property. This means a policy with limits of $500,000 would typically provide between $250,000 and $375,000 in contents coverage.

Newer (since 2011) ISO standard homeowners policies specifically limit coverage on personal property owned or used by the insured and located in a self-storage facility to 10 percent of Coverage C limits or $1,000, whichever is greater. Insurance policy forms differ, however, so your policy might not have this limitation.

For example, older ISO homeowners policy forms state:

Our limit of liability for personal property usually located at an “insured’s” residence, other than the “residence premises,” is 10% of the limit of liability for Coverage C, or $1000, whichever is greater.

This policy would provide up to your contents limit for your goods in a storage unit, because the unit is not a “residence.”

Reading your policy’s Coverage C section carefully will help you determine what limits apply to your goods in storage. The policy’s exclusions, sublimits and valuation basis also determine how well it protects your off-premises belongings.

• Exclusions: Homeowners policies exclude coverage for damage due to flood, earthquake, landslide and mold. In hurricane-prone coastal areas, policies also exclude coverage for windstorm damage.
• Sublimits: Homeowners policies typically place much lower sublimits on certain high-value, easily lost, stolen or damaged items, such as jewelry, furs, stamps, coins, guns, computers, antiques and collectibles, as well as on business personal property. Your policy might limit coverage for these items to as little as $1,500.
• Valuation: Homeowners policies value lost or stolen property on either an actual cash value or replacement cost value basis. This determines whether your insurer will pay you either the actual cash value of your lost or damaged items (usually purchase price less depreciation) or the cost of replacing them with similar goods after a loss. Replacement cost policies cost more, but provide higher payouts if you have to file a claim.

Self-Storage Tenant Policies

Many self-storage unit operators offer tenants specialized insurance to cover their stored goods. Here are some things to look for:

• Exclusions: Unless a policy covers exposures excluded by your homeowners policy, such as flood, mold, earthquake and windstorm, it might duplicate coverage you already have.
• Primary coverage: Some policies have an “other insurance” clause, which stipulates that it will only pay a claim after any other applicable insurance policy (such as your homeowners policy) pays a claim.
• Low deductibles. Some policies offer very low or zero deductibles. A low- deductible policy that offers primary coverage means you can file a claim without affecting your homeowners coverage.
• Strong A.M. Best rating. Most storage unit losses are small, only a few thousand dollars. But a major event, such as a fire, could destroy an entire facility. If the operator of a large facility sells coverage to many tenants, total claims could reach hundreds of thousands or millions of dollars. You’ll want coverage with an insurer that can easily absorb this type of loss.

Inside Self-Storage magazine reports that several states require self-storage operators to have an insurance license to sell coverage to tenants, including Arizona, California, Florida, Illinois, New Jersey, New York, North Carolina, Texas, Utah and Washington. Before buying coverage from a self-storage operator in one of these states, check with the state insurance department to ensure they have the proper licensing.

Self-Storage Safety Checklist

1. Read your self-storage unit’s rental agreement carefully. Most place responsibility for loss or damage solely on the renter. Some even require renters to have insurance on their goods in storage. Coverage under your homeowners or renters insurance policy should apply.
2. Check the facility’s perimeter. Does it have a high, secure fence that would be difficult to breach? Are gates secure?
3. Check security procedures. Does the facility restrict access and require all visitors to sign in?
4. Check staffing. If the facility is open 24/7, does a manager live on site?
5. Check the lighting. Good lighting enhances security of both goods and people.
6. Look for 24/7 video surveillance, with cameras located on every floor, not just at entrances.
7. Check fire alarms and sprinklers. Every floor should have an alarm and sprinkler. The most secure facilities have fire alarms and sprinklers in every unit.
8. Examine the structure of individual units. Are they reinforced so intruders cannot access them from inside? Are the doors recessed and padlocked? This makes it more difficult for intruders to cut a lock and break in.
9. Look for an on-site communication system or intercom. If an accident or other incident occurs, an intercom can help you contact the manager quickly.
10. Consider protection from climate extremes. Is your unit raised above street level so rain or snow cannot penetrate? Many materials are sensitive to dampness, high or low temperatures. A unit with heat and air conditioning will probably cost more, but climate controls can help protect your goods from damage.