Storage Units Insurance for Investors
For the past few decades, self-storage facilities have been a growing segment in commercial real estate in Colorado and nationwide. Consumers purchase and store items such as boats, RVs, ATV’s tools, gardening equipment, and other sentimental items. Storage facilities help to keep these belonging’s safe. Nearly 9% of American households are utilizing a storage unit. This is a multibillion-dollar industry that has been built one contract at a time for a 10 X 10 space. In this article, I will show you how insurance policies cover storage facilities. We will discuss insurance exposure as a consumer and as a business owner.
Insurance as a consumer:
If you are renting a storage unit, you will be asked to agree with the terms and conditions of the rental contract whether you intend to purchase the facility’s insurance for your personal property or show evidence you already have insurance coverage elsewhere. The storage facility will want to pass the liability to your insurance carrier in the event of a fire or theft.
• Insurance extension from your current homeowners: Coverage could also extend from your homeowners’ policy to your storage; however, it is usually only about 10% of your home policy’s personal property total coverage. If you use your existing home insurance coverage to insure your items in the storage unit, please be sure you talk to your Agent to confirm the coverage extension and limit.
• Storage unit insurance offered by the facility: Many storage facilities require proof of insurance before renting a unit. As a result, an additional fee is charged to the tenant with a higher premium and lower coverage. These policies will provide coverage on an Actual Cash Value basis and not the actual Replacement Cost. In addition, the policies offered by the storage facility usually limit the number of items covered under the policy.
Insurance as a business owner:
Real estate investors and other business owners have seen the high demand for storage facilities. The industry has a 90% occupancy rate with lower maintenance and expenses than conventional family rentals. If you currently own or are planning to own a storage facility, I highly suggest that the business owner require your tenants to have insurance for their belongings. With regards to your business insurance policy:
• Review the building(s) classification: Most storage facilities are masonry or metal non-combustible construction. Therefore, it is imperative to review the building classification with your Agent to ensure you have the best rate.
• Reconstruction cost: Self-storage buildings need to be evaluated differently compared to other real estate buildings. They do not have plumbing and HVAC systems. Please review the reconstruction cost for each building with your Agent to avoid over-insuring it.
• Loss of income: In Colorado, the average occupancy rate for self-storage facilities is 90%. Be sure you have enough loss of income coverage in the event of a total loss.
I highly recommended that you forward a copy of your lease agreement to your Insurance Agent. Your Agent can review and give any additional recommendations to avoid gaps in your coverage.
If you would be interested in obtaining more information, feel free to contact me. Our company specializes in Self-Storage Insurance packages for Real Estate Investors.