ecent industry articles have detailed the increasing effect of heat and natural disasters on self-storage operators and their facilities, including the November issue of SSA Magazine. If you have not done so recently, check with an insurance agent who specializes in self-storage to ensure that you have the coverage you need to protect your investment from these threats.

But what about coverage for tenants’ stored property at your facility? If your tenant suffers loss of or damage to their stored property, chances are they will look to your facility to make them whole. However, most insurance policies covering storage facilities do not cover loss of or damage to tenants’ stored property.

Moreover, many rental agreements expressly state that the operator disclaims all liability for loss or damage to tenants’ stored property, does not carry insurance for such loss or damage, and requires the tenant to have appropriate insurance coverage or other protection in place during the rental period. These provisions in the rental agreement significantly limit legal exposure for storage operators but do not solve the practical problem of an angry tenant who just found out that their property was destroyed following a flood or fire.

Of course, you could choose to pay the tenant out of your own pocket as a gesture of goodwill. Another option that operators are increasingly using is to offer self-storage tenant insurance or protection plans to their tenants. These products provide low-cost coverage for tenants’ property. Instead of looking to the storage operator to pay for loss or damage, the tenant can file a claim with the insurance company or protection plan provider (depending on how the program is structured).

How can a storage facility make these coverage options available to their tenants? The sale of insurance requires an insurance license. Typically, an individual can obtain an insurance license only after numerous hours of studying and passing a licensing examination. Fortunately for storage operators, due to the lobbying efforts of the SSA and affiliated state associations, 39 states currently allow self-storage operators to obtain a limited insurance license for the sale of tenant insurance. The tenant insurance provider will assist you with this licensing process. Three other states (Michigan, Minnesota, and Rhode Island) provide an express exemption from licensing for self-storage operators under certain circumstances.

Generally speaking, protection plans are add-ons to an operator’s existing rental agreement and do not require licensing. Operators should consult with their legal counsel and protection plan provider to ensure that the protection plan meets the legal requirements in their state.

Finally, operators should review the different products and benefits before deciding whether to offer tenant insurance or a protection plan. Either way, operators should make one of the products available to shield against financial loss from a disaster.

Please email me at jdoherty@selfstorage.org if you have any questions about your options.