Every smart self-storage facility owner strives to be properly protected from risk by carrying the correct insurance. But do you have every base covered? In this Self-Storage University podcast we’re going to review some of the risks you may not have considered.
Episode 141: Insurance Considerations Transcript
The dictionary defines insurance as a contract policy where an individual or entity receives financial protection or reimbursement against losses. This is Frank Rolfe with the Self Storage University podcast. We're going to talk about insurance, but from the factor of do you have all of those potential losses actually covered? Because many people with that storage facility, they think they have insurance. They have a document that says insurance on it from an insurance company. But there may be little items in there that truly are not covered. And I just want to make you aware of these so you can check on your policy or if you're buying a storage facility to make sure your policy encompasses those.
So one that many people think they have coverage on, but they don't because the insurance company has gone in and very slyly removed it from their policy is something called SAM coverage. SAM stands for sexual assault and molestation. And you may say, well, gosh, is that really part of the storage industry? Look, it's a part of all industries at this point. You've seen all the headlines. It's bringing down Hollywood of people claiming that they were assaulted even though there's no evidence and it's simply a he said, she said style of case. And it could come, it could emanate from your manager. You don't know what could cause it. A maintenance person you hired. It's a policy item that most people thought they have in their standard policy, but a lot of carriers have started eliminating them because there have been so many SAM cases filed in recent times that they want nothing to do with it. They want to insure that storage facility, they don't want to be covering potential assault charges against a manager that date from 14 years ago, that kind of thing. So you need to check and make sure you have SAM coverage. Now, if you don't have SAM coverage, there are some companies, I believe, that are issuing SAM policies, but it is something I would definitely want to know.
Also, do you have the correct auto insurance coverage when your manager is on company business? If your manager goes to the bank, for example, to make a deposit or just to go buy some Xerox paper, the problem is, if they have a car accident, were they on their time or your time? And if the answer is, well, they were on your time, you told them to go down to office supply store, then theoretically, do you have insurance for that if they have that accident? I myself had my car hit by someone who was driving, they claimed for Grubhub, but then Grubhub said, no, they weren't driving for us. They weren't doing a Grubhub delivery at that time. So it was a big mess. I don't know how it ended up being resolved from the insurance company. I got paid off. I don't know what happened between State Farm and them. But you have exposure if you have the manager go do some assignment utilizing an automobile for what happens with their driving. So you need to make sure that you understand that and you've got sufficient coverage for that.
Also your vendors, when you have people come out and do things at your facility, whether it's fixing a roll-up door or fixing a fence, do they have insurance? Because if they don't have insurance, it's possible that you're once again going to be sucked into who knows what. Guy falls off a ladder, gets electrocuted, he's not one of your employees but still, maybe you didn't vet their insurance to make sure it was in force. You need to find out if you've got insurance for that. Many policies will allow you to insure those vendors coming in, but you'll have to pay extra for it based on the dollar amount of what you have them do. But you need to have a policy, an operating manual concept of how you deal with vendors and their insurance. Because the last thing you'd want to have is someone to come over and just paint something and fall off their ladder and sue you for a million dollars. So you have to make sure you have coverage for that.
Also, should you get a key man policy? Should you get that additional insurance policy called keyman insurance? What that does is if you should die, it pays off your mortgage. That's basically what it is. It's like a life insurance policy, only it's designed to pay off your mortgage. They're not horribly expensive. Not many people die under their keyman policy, but you might consider it, particularly if you're kind of a sole proprietorship. You know, what is your spouse going to do should you be killed? Will they be able to run that facility or should you get the debt paid off? So you might check into that.
Another common issue right now in the world of insurance is cyber insurance. Now, cyber insurance, you can always say, well, that doesn't really apply to me, but you would be shocked when it happens to you. And they're so professional about it. We had a case a while back where someone tried to pretend to be the title company on a closing and they had obviously been watching and sleuthing this so well, they had every correct name of every correct person who was in on the transaction, they wrote the whole thing up. And they only sprung into action right when it was funding. So they had been following this on some kind of program for a while, and then they suddenly sent a thing saying, okay, yeah, here's where to wire the money. Now, the only good news was the person they emailed it to knew immediately on sight that none of that sounded normal. So they then called the title company, and the title company said, no, we never sent you that email.
But cybercrime has become a huge business in America today. There's huge millions and millions, perhaps billions of dollars a year that are lost to cyber criminals. And if you do not have cyber insurance and you were to send your money to the wrong bank account, then you can't ever get it back. It could be a real colossal disaster. So see if you have cyber insurance. If you don't, you probably want to get it because you may say, "Well, I don't think I'm big enough for that or complicated enough." Oh, you are. The cyber criminals are watching probably most every American today looking for opportunities to jump in there. So that is definitely a policy you need to take a look at.
Finally, do you have enough insurance liability coverage? Do you have enough coverage period? When's the last time you got your coverage on your storage facility on the buildings? You know, what things cost today have nothing to do with what things cost pre-Covid. We were all told that after Covid the prices would go back down, but they didn't. The cost to build things today is much, much higher than ever before. If you got your insurance 10 years ago, I guarantee you it's not enough. It is probably not enough to fix or replace that building. So you need to check into that. And then on the liability side, you know, American juries keep giving larger and larger settlements on almost everything. They see it as one great kind of Robin Hood act, which allows them to take from the rich, which is any kind of property owner, and give to the poor, which is any kind of person who doesn't own property.
And it's become a real problem. And many people are going around with their storage facility insurance believing they have enough coverage, but they really don't. Their limits are way too low. In today's modern world, on the liability side, you're gonna need to have at least seven figures plus. And that's just for things like slip and falls. So go over your policy with the carrier and see if you truly have enough insurance, because you may find, uh-oh, you don't. The good news is you can get it fixed, but you can only get it fixed if you do it before there's actually a loss. The bottom line is that insurance is one of the most important things any storage owner can have. It's absolutely vital to be able to sleep at night. I don't know how people ever survived before the era of insurance, but you got to make sure you have the right insurances. You gotta stay current on insurance. The world is rapidly changing and you can't stop that. You can't stop the change, but you can be the solution to make sure you have enough coverage. This is Frank Rolfe, the Self Storage University podcast. Hope you enjoyed this. Talk to you again soon.