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Fall 2021


. Lease Agreements and Risk Management
. Cyber Insurance for Self-Storage Risks
. Upgrading Older Buildings

Lease Agreements and Risk Management

Lease Agreements and Risk Management
Your lease agreement (or rental contract) is one of the most important elements of your self-storage operation's risk management program. It is the most critical document executed between the business and the tenant in terms of protecting the facility's interests. The lease agreement formally establishes the relationship between the facility and the tenant, and its wording is of the utmost importance.

A well-written contract that has been properly vetted by an attorney can go a long way toward mitigating the severity of liability claims and lawsuits. A poorly worded lease agreement or one that fails to include relevant clauses can have the opposite effect. In fact, this is one of the most common challenges encountered by claims adjusters working with self-storage businesses.

The following are some key elements that should be included at a minimum.

• Tenant Insurance – Explains that the facility has no responsibility for insuring tenants’ stored items, explains any proof of insurance requirement, and references the facility's tenant insurance program.

• Hold Harmless Agreement – States that the facility is not responsible for damage caused by the actions of the tenant or other tenants.

• Lien Sale Laws/Default and Remedies – References the state's lien sale laws and asserts the facility’s right to seize and dispose of a tenant’s stored items in the event of default.

• Prohibition of Hazardous Materials Storage – Details the types of materials that are prohibited from being stored in a rented space.

• Prohibition/Limitation of Activities – Outlines specific prohibited activities including smoking in rented spaces, use of heating devices or open flame, performing vehicle repairs on premises, and residing in a rented space.

• Limitation of Value – Clearly states the maximum value of items stored in a rented space without prior approval.>

The importance of including these items in a lease agreement cannot be overstated. It is critical that your self-storage operation’s lease be reviewed by your insurance agent and attorney to avoid creating exposures that could leave the business vulnerable to costly insurance claims and lawsuits. Laws vary by state, and an attorney can ensure that the lease agreement complies with the current legislation in that state. Additional information may be available from your state's self-storage association, many of which have lease agreement templates available to members that have been reviewed and approved by the association’s legal counsel.



Cyber Insurance for Self-Storage Risks

Cyber Insurance for Self-Storage RisksSelf-storage facilities, along with other small and medium-sized businesses, are increasingly vulnerable to the risk of cyberattacks and data breaches. Many business owners underestimate the threat, but the reality is that cybercrime is one of the fastest-growing risks to businesses of any size. Given this trend, cyber insurance is a wise addition to your risk management plan.

MiniCo offers two insurance products to address cyber risk. First, our specialty businessowner policy for self-storage operations includes optional cyber and data compromise coverage with a limit of up to $50,000, available in all states.

If your business needs additional coverage, we offer as a second option a stand-alone cyber insurance policy for small and medium-sized businesses that addresses a range of exposures including breach response, business interruption loss, cyber extortion loss, data recovery costs, data and network liability, and eCrime. Features of the stand-along policy include:

• Minimum premiums starting at $250 for $250,000 limit • $350 for $500,000 limit
• Available in all states except AK, CA, FL, LA, MN, NM, NY, VT, and WY
• A.M. Best "A" rated carrier

Ask your insurance agent for a quote and click the link below to download a free white paper about cyber insurance.

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Upgrading Older Buildings

Upgrading Older Buildings
As the self-storage industry ages, upgrades are becoming a key topic among facility operators and vendor companies specializing in the market. The primary purpose of upgrades is to enhance rental revenue and property valuations. A secondary consideration, however, is how the upgrades impact your insurance costs and improve your location from a risk management perspective. From an insurance underwriter’s view, building and security upgrades for structures and premises of older locations is considered a positive action and will be reflected in the premium analysis.

Insurance underwriters recognize the value of these upgrades and how these improvements can help mitigate the frequency and severity of claims. Innovative technology and more durable construction material are definitely changing our self-storage landscape not only for new facilities being constructed but also the operations that are electing to upgrade. Here are some property and security upgrades that may be considered by underwriters evaluating a new or renewal insurance application:

• Security cameras and lighting
• Electronic premise inspection system
• New doors on all units
• Electronic gate and entry access systems
• Electrical
• New roof
• Electronic unit locking system
• Unit heat sensors integrated with central alarm

Keep in mind that upgrades are not the only consideration when it comes to rating a risk. The primary rating elements are geographic location, building value, construction type, and the operation’s three-to-five-year loss ratio. Operational policies such as requiring tenants to provide evidence of insurance and including a value limitation in the lease agreement are also risk management elements considered by the underwriter.

When it's time to make improvements at your facility, be sure to do your due diligence in selecting reputable vendors that are licensed and insured and come with impeccable references from previous clients. With the wide range of technology and high-tech options available, it is also important to vet the products you're considering against industry standards and choose the upgrades that will meet your operation's needs. Finally, schedule a policy review with your independent insurance agent to discuss any planned upgrades and identify exposures that may need to be addressed through changes to your coverage, limits, or deductibles.

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