Covering Your Property in Storage

Too much stuff? Almost 9 percent of American households rented a self-storage unit in 2012, up from 6 percent in 1995. Before joining them, be aware that you, as the lessee, remain responsible for loss or damage to everything in your unit, unless your rental agreement specifies otherwise.

The states of The contents coverage section (Coverage C) of your homeowners policy protects your personal belonging, no matter where they’re located. The typical policy provides between 50 and 70 percent of the policy’s dwelling limits in coverage for personal property. This means a policy with limits of $500,000 would typically provide between $250,000 and $375,000 in contents coverage.

Newer (since 2011) ISO standard homeowners policies specifically limit coverage on personal property owned or used by the insured and located in a self-storage facility to 10 percent of Coverage C limits or $1,000, whichever is greater. Insurance policy forms differ, however, so your policy might not have this limitation.

For example, older ISO homeowners policy forms state:

Our limit of liability for personal property usually located at an “insured’s” residence, other than the “residence premises,” is 10% of the limit of liability for Coverage C, or $1000, whichever is greater.

This policy would provide up to your contents limit for your goods in a storage unit, because the unit is not a “residence.”

Reading your policy’s Coverage C section carefully will help you determine what limits apply to your goods in storage. The policy’s exclusions, sublimits and valuation basis also determine how well it protects your off-premises belongings.

Exclusions: Homeowners policies exclude coverage for damage due to flood, earthquake, landslide and mold. In hurricane-prone coastal areas, policies also exclude coverage for windstorm damage.
Sublimits: Homeowners policies typically place much lower sublimits on certain high-value, easily lost, stolen or damaged items, such as jewelry, furs, stamps, coins, guns, computers, antiques and collectibles, as well as on business personal property. Your policy might limit coverage for these items to as little as $1,500.
Valuation: Homeowners policies value lost or stolen property on either an actual cash value or replacement cost value basis. This determines whether your insurer will pay you either the actual cash value of your lost or damaged items (usually purchase price less depreciation) or the cost of replacing them with similar goods after a loss. Replacement cost policies cost more, but provide higher payouts if you have to file a claim.
Self-Storage Tenant Policies

Many self-storage unit operators offer tenants specialized insurance to cover their stored goods. Here are some things to look for:

Exclusions: Unless a policy covers exposures excluded by your homeowners policy, such as flood, mold, earthquake and windstorm, it might duplicate coverage you already have.
Primary coverage: Some policies have an “other insurance” clause, which stipulates that it will only pay a claim after any other applicable insurance policy (such as your homeowners policy) pays a claim.
Low deductibles. Some policies offer very low or zero deductibles. A low- deductible policy that offers primary coverage means you can file a claim without affecting your homeowners coverage.
Strong A.M. Best rating. Most storage unit losses are small, only a few thousand dollars. But a major event, such as a fire, could destroy an entire facility. If the operator of a large facility sells coverage to many tenants, total claims could reach hundreds of thousands or millions of dollars. You’ll want coverage with an insurer that can easily absorb this type of loss.
Inside Self-Storage magazine reports that several states require self-storage operators to have an insurance license to sell coverage to tenants, including Arizona, California, Florida, Illinois, New Jersey, New York, North Carolina, Texas, Utah and Washington. Before buying coverage from a self-storage operator in one of these states, check with the state insurance department to ensure they have the proper licensing.

To make sure you have the proper coverage for your property, no matter where it’s located, please contact us for a policy review and consultation.