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August 22, 2018
Utilizing insurance plans can help you maximize profits and protect both you and your tenants.
Insurance plans are one of the best ancillary products you can provide that will drive your profits. It also helps customers to know that they are responsible for their property.
It transfers the risk and some responsibilities to your tenant.
Owners may be hesitant to implement insurance plans because they think it could drive some customers away due to cost. However, most storage facilities should consider offering or requiring insurance.
Just like other safeguard features such as security cameras, insurance will protect your customers’ valuables. It is a value-added product.
Often, customers do not understand the risks of using self storage and mistakenly believe that the owner or managers are responsible for their belongings.
Many providers of self storage insurance provide coverage with no deductible and a group of professionals that can handle claims quickly.
Insurance is also an excellent product for the tenant because they can get good coverage at a small cost. For example, a $8 to $10 monthly fee can get your customers up to $2,000 of coverage.
Providing insurance options for tenants will increase your profits. Insurance providers pass along a portion of the revenue to your property for signing up tenants.
For example, $9 per month insurance will typically net you $4 a month. If you are selling a $40 unit, that is a 10% increase in pure profit!
On The Move provides a handy calculator indicating what their insurance can do for your profits. From these calculations, you can see that they take about $1 of the monthly insurance payment and pass the rest to the operator.
The calculator provides a very good example of a 450 unit facility requiring insurance, showing that the insurance increases the profit by $31,194, a very significant increase.
A facility with 1000 units at 92% occupancy will increase profits by a little over $70,000. The calculator illustrates the incredible increase in profits achievable by providing insurance for your customers.
These calculations are for the base rate of insurance offered. You can also provide increased insurance coverage for a higher fee. Most customers will not choose to purchase the increased coverage, but it is an option for them and would increase profits for you.
An additional benefit of having insurance plans in place is that it can reduce business risk.
Helping your customer understand their risks will reduce yours. Even if your lease states that the facility is not responsible for customer property, it is possible for customers to try to cast blame on management if something happens.
Using a 3rd party to handle claims will help prevent customers from filing complaints, posting negative remarks on social media, and bringing lawsuits against your property.
You have two main options when providing insurance plans to your tenants. You can make it lease mandatory or offer it as an upsell product.
Lease mandatory does not mean the borrower must buy insurance from you. It just means they need coverage to rent with you. They can purchase insurance through you, or they can show they have coverage from a rental or homeowners policy.
Lease mandatory insurance is beneficial because most tenants will sign up for your insurance program; therefore, this is the preferable method.
Be open and upfront about the insurance from the beginning so that the customer is not surprised while signing the lease. If customers have proof of homeowners insurance, they should be aware of limitations and high deductibles.
According to CNN, if they end up making a claim through their homeowner's insurance, their rate could increase up to as much as 30% or the insurance company could drop their policy entirely and refuse to insure them.
This option requires that your managers use sales techniques to swing the sale of the insurance and, because it is optional, many people will not accept your insurance.
The upselling route can be a hard sell. Potential tenants want to be assured their belongings are safe at your property, and having insurance as an option rather than a requirement can emphasize the reality of the risk. Therefore, when providing optional insurance, make sure to offer it as a massive benefit to the customer.
Because fewer tenants will agree to purchase insurance, there will be more risk to you and your managers if items get stolen or damaged.
If you are a specialty storage property, you can find insurance providers that will cater to your needs.
Tenants who store highly valuable items are willing to pay a higher insurance premium for additional protection.
For example, if you specialize in wine storage, you should partner with an appropriate insurance provider. In this case, specialty insurance better serves your tenants and increases your bottom line.
It is important to note that some management systems such as SiteLink will automatically drop the insurance premium charge from a tenant’s profile if the tenant becomes delinquent in rent payments.
If managers forget to add back on the insurance coverage and premium charge after the tenant pays their rent, the tenant will not be covered, and you will be missing out on those payments. Adding back the insurance will keep participation rates up, along with profits.
Having tenant insurance available at your facility is a valuable safeguard that reduces your risk of litigation and complaints from upset tenants. It allows you to focus on your core business and increase the profits at your facility.
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