The Fifth Rule of Thumb – Managing your Property – Tenant Insurance

When you are in the self-storage business you are also in the insurance business. You want to make sure that your tenants have insurance on their belongings. If they don’t provide their own insurance, then you want to have insurance that they can add on to their monthly bill. Tenant insurance protects you and the tenant.

There are several reasons that you want to have tenant insurance. The first and most important reason is that when the tenant signs the contract, you need to make sure that they know that you are not liable for their belongings. They are allowed to store whatever they want in the unit, as long as it fits within the parameters of the lease, but you are simply renting them space. If something happens to their belongings and they don’t have insurance, it is going to be a very uncomfortable conversation. On the other hand, if they have insurance, and their belongings are damaged, they will feel like you helped protect them. One way will result in referrals and the other will result in negative reviews.

When you create your lease, make sure that you put in a section that states that you are not liable for their belongings no matter what may happen. However, you do offer tenant insurance for just a few dollars more a month. It is a good business model to not rent to people if they don’t have renters’ insurance.

When renters ask if they can get their own insurance through their own insurance company, that is fine as long as they provide you with proof of insurance. You can present yourself in a positive light when you explain that there is a very small chance that the building could burn down or that someone could break into the property. While you take every precaution to make sure that neither or these things happens, you want to make sure that they are protected. There is always a chance that something bad can happen, but you don’t necessarily want to point them all out to your potential renters, you might scare them away.

If you use the right insurance company, then you can use insurance as a second source of income. Some insurance companies will give you back 25% of the premium. If your client needs to file a claim, then you will help them get the right paperwork and help them get it turned into the insurance company, but the insurance company will take it from there.

One reason that they want to use your insurance instead of their homeowner’s insurance is because if they must file a claim, it won’t affect their homeowner’s insurance rates. There is also no deductible on these policies while a homeowner’s policy has a deductible.

When you take over an existing self-storage facility that doesn’t currently require tenant insurance, that is something that you will need to introduce in your welcome letter. Let your tenants know that the proof of insurance is required to protect all of the tenants. You will require them to drop off proof of insurance in the next 30 days or you will require that they sign up for insurance by the end of the 30 days. You can either include a copy of your insurance form in your welcome letter or you can have a copy on your website. You want to make it as convenient as possible for them to get their new insurance.

Another thing that you want to do is to educate your tenant that these insurance policies have value limits. Most of the time they will only cover up to $5,000. If they are storing more than that they need to get more than one unit. There is always the potential of a natural disaster. You don’t want to be portrayed as the bad guy because no one’s belongings were protected.

When you are renting out a unit, make it very clear how tenant insurance works, how your tenant is protected and what your requirements are as an owner. You protect everyone by requiring your tenants to have insurance. As always, happy investing.