New Direction: Built for Today’s Modern Self-Storage Industry, Tailored for Partnership
By: Matt Schaller, President of Tenant Property Protection
DIRECTION – A CALL TO ACTION, THE FUTURE ARRIVES!
The direction in 2008 was that the self-storage industry was hit hard by the economic downturn, which reduced investment opportunities and borrowing ability. We saw an opportunity to introduce a new product that could not only improve the quality of service to storage owner/operators and tenants, but also provide additional income. Recognizing the limitations of working within insurance guidelines and regulations, our goal was to replace the old insurance model and create a new product to specifically avoid those limitations. Thus, was born Tenant Property Protection!
TPP was created from the ground up and designed to alleviate the flaws inherent in tenant insurance programs. Our unique protection plan addressed outdated, problem areas including State insurance licensing laws, filings, rebating, commissions/admin fees, Actual Cash Value loss settlement, and the “Other Insurance” clause, to name a few.
TPP is an easy to use Protection Plan with unparalleled advantages over the old tenant insurance model. When implemented correctly by a committed operator, this new product was destined to become the number two revenue source for their facility, second only to rental income.
THE KEY TO SUCCESS – INDEMNITY
Structured as a Protection Plan, TPP is designed to utilize the laws available under the lessee/lessor relationship to transfer risk. An agreement to indemnify another is not insurance and has nothing to do with insurance. It is a contract/agreement between two parties whereby one agrees to indemnify and hold another party harmless for specified actions, inactions, injuries or damages. This point cannot be overemphasized. In plain English, it is the promise, contractually, of one party to make the other party whole after a loss or occurrence.
Contractual transfer of risk happens routinely in the lease of premises when the landlord requires the lessee to indemnify the landlord for damage to the premises, damage to leased contents and indemnification for bodily injury or property damage that may occur on the landlord’s premises, regardless of negligence.
This indemnification concept allows Tenant Property Protection to operate in all 50 states, since it is not insurance. Only 21 states have self-storage insurance licensing laws (limited licenses) allowing the legal sale of tenant insurance. Any providers selling tenant insurance in the other 29 states are operating outside insurance regulations/guidelines.
TAKE ADVANTAGE OF THE ADVANTAGES
At Tenant Property Protection, we can determine fees charged whereas tenant insurance programs are bound by individual State rate filing requirements and must have State approval before implementing rate or coverage changes.
Insurance programs do not allow payment of sales commissions to anyone that is not a licensed insurance agent. Tenant Property Protection is not insurance and can compensate the owner/operator for each Protection Plan sold.
Many insurance license applications require information that owners are not willing to provide and/or are uncomfortable complying with. Examples: Social Security Number, background checks, credit checks, fingerprinting. States also include fees that are due on a recurring basis. With TPP these costly, time consuming hassles are eliminated.
BUYER BEWARE THE “OTHER INSURANCE” CLAUSE
Many tenant insurance providers have created potential pitfalls by patching together their policy forms from insurance carriers, and/or taking commercial lines policies and trying to make them fit personal lines exposures.
One such pitfall is a clause called the “Other Insurance” clause. Nearly every insurance policy contains an “Other Insurance” clause. This clause was originally created to address the situation where an insured party had multiple policies that insured the same risk. This can cause unwanted problems in self-storage. Generally, when a tenant buys coverage from an owner/operator they are under the impression that policy alone covers their items in storage. Should they, however, already have another policy covering the same property, the “Other Insurance” clause could come into play, causing potential conflict. Examples of “Other Insurance” policies: Home Owners, Renters, Business Owners.
The “Other Insurance” clause could either deny coverage for the tenant citing their “Other Insurance” is primary, or it could severely limit the settlement paid to tenant. Neither is what the tenant is expecting and can cause confused, angry storage customers during the claim process.
WILL YOUR TENANT GET PAID WHAT THEY PAID FOR?
Let’s start by unraveling the true meaning of Actual Cash Value (ACV) versus Replacement Cost. In tenant insurance programs, one of the most confusing and misleading terms is “Actual Cash Value”, otherwise known as the depreciated value loss settlement clause. Under this clause, items are depreciated based on their age and what the item cost new, limiting the payout to the customer at claim time.
Insurance providers will often hide this in their “insurance-ese”/verbiage. Example: “We will pay the lesser of; replacement cost, cost of repair, or cost of restoration or Actual Cash Value of the item.”
The lack of understanding of Actual Cash Value, can leave people feeling that they have been misled and are not getting what they paid for. When your tenant is paid a fraction of the replacement cost of their items because they’ve been depreciated based upon age, you or your manager could be facing an enraged tenant.
During a time when storage operators are considering “mandatory/lease compliant” type insurance programs with high participation numbers to drive operational profitability, one must also consider the following – with high numbers of insureds in the 65-75% range, the exposure to large losses will also increase.
What will happen if, for example, a 400-unit facility with 70% tenant participation incurs losses in the $500,000+ range, or more. Will your tenant insurance program pay all those losses? More than likely their insurance carrier will enforce every policy provision, including the “Other Insurance” clause, to minimize their losses. If the “Other Insurance” clause is included in your tenant insurance provider’s policy it can be enforced! Owner/operators should be very concerned about how the “Other Insurance” clause will affect them, their managers and, more importantly, their tenants.
THE CHOICE IS CLEAR!
Choosing a protection plan over tenant insurance should be a snap when you do a quick comparison. Since storage owner/operator’s profits rely on their tenants, the primary concern should be “What product is best for my customer”. Simple, easy to understand, no insurance nonsense or hassles — TPP’s protection plan is clearly the best choice!
We take pride in our responsiveness and high level of customer service, which is unparalleled in the self-storage protection/insurance marketplace. Tenant Property Protection utilizes a professional claims management staff to provide tenants, owner/operators and their managers with a true 24-7 claims experience.
Tenant Property Protection has a variety of personalized revenue-generating options. Call TPP today to at 877.575.7774
Tenant Property Protection, head-quartered in Arizona specializes in tenant protection plans for self-storage operators focused on tenant, manager and owner/operator satisfaction.
Matt Schaller is President of Tenant Property Protection. Matt has 29 years of experience in both the insurance industry, including global and regional brokerage experience and self-storage tenant insurance, as well as property protection plan expertise. Matt is a frequent speaker at Inside Self-Storage events. For more information visit us at: