A tenant protection plan is a monthly add-on that a storage tenant pays, with their rent, so their stored belongings are covered up to a limit when a covered loss happens. Whether a plan counts as insurance, who may sell it, and whether you can require it depend on your state and on your provider's contract, so read the terms and ask your attorney and insurance agent before you start.
This guide is general information, not legal or insurance advice. Insurance sales are regulated state by state.
Why tenants need some coverage
Your own property insurance usually covers your buildings and your liability as the owner. It does not usually pay for a tenant's furniture, tools or boxes. That is why leases typically say the tenant is responsible for insuring their goods. When a roof leaks or a fire starts, an uninsured tenant has nowhere to turn but you, and a dispute follows.
A protection plan or proof of the tenant's own insurance fills that gap. See self storage insurance basics for what your own policy needs to cover.
Three ways tenants get covered
| Option | How it works | What you do |
|---|---|---|
| Your protection plan | Tenant enrolls at move-in; monthly charge is added to rent | Bill it, report it to the provider per the contract |
| Tenant's own insurance | Homeowner or renter policy that extends to off-site storage | Collect proof, such as a policy page, and track expiry |
| Nothing | Tenant signs that they accept the risk | Have a clear signed waiver in the lease, reviewed by your attorney |
Many owners offer the first and allow the second. The third is the riskiest for both sides.
Insurance or not insurance
This is the part to check carefully. Some programs are insurance policies issued by an insurer, with the facility acting as a licensed seller or under an exemption. Others are structured as a non-insurance contract in which the provider promises to cover losses. Each type is regulated differently, and states have their own licensing rules for whoever sells coverage.
Ask any provider:
- Is this program insurance? Who is the insurer or the guarantor?
- Do I or my staff need a license in my state to offer it? What training does the provider supply?
- What exactly is covered? What is excluded (vehicles, cash, jewelry, flood, earthquake, mold)?
- What are the limits, and what is the deductible?
- How are claims filed, and who handles them?
- What do I get paid, how, and when?
- What happens if I leave the program?
- Can tenants cancel, and how?
- What do I tell tenants to say when they sign?
Get the answers in writing. Then bring the contract to your attorney.
Mandatory or optional
Owners usually pick one of three setups.
- Optional. The tenant may buy it, and can decline. Fewer sign up, but fewer disputes.
- Required: plan or proof. The tenant must either buy your plan or give proof of their own coverage. Common in practice.
- Required: plan only. Everyone must buy the plan. This can raise questions about disclosure and fairness, and some states may regulate it. Ask your attorney before using it.
Whichever you pick, the lease must say it plainly. See writing a good self storage lease. Disclose the price and what it covers at checkout, not after.
Who pays claims
When a covered loss happens, the claim goes to the provider or insurer named in the program terms, not out of your pocket. Your role is to give the tenant the claim contact, document the damage with photos and a note, and keep your own records.
If you are at fault, such as a roof you failed to maintain, your liability coverage may respond. A tenant who is not covered may also look to you. That is why maintenance records matter.
How revenue works
Providers pay owners in different ways. Some give a share of the monthly charge, some pay a flat amount per enrolled tenant, and some work differently. The contract spells it out.
Do not rely on any number from a brochure or a sales rep. Run your own math with the terms you have in writing.
Worked example (illustrative)
Say you have 120 units with 100 rented. The plan costs the tenant $12 a month. Your share, per the contract, is $4. If 60 of 100 tenants enroll:
- Monthly plan income to you: 60 x $4 = $240
- Annual: $240 x 12 = $2,880
If instead only 30 enroll, you earn half that. The share, the price and the enrollment rate are all made-up numbers. Use your contract terms and track enrollment each month.
Another way to see it: if one extra enrolled tenant earns you $4 a month, ten more enrolled tenants add $40 a month, or $480 a year.
How to set it up
- Choose a provider. Compare at least two. Look at the contract, not just the pitch. Check that the provider is licensed where required.
- Check your state. Ask your attorney about licensing for you and your staff, and rules on required coverage.
- Update your lease. Add a clear section: coverage is required or optional, the options, the price, and what happens if proof lapses.
- Update your online rental flow. Show the plan, its price and what it covers before payment. Keep the choice clear.
- Add it to billing. The monthly charge should sit on the tenant's ledger with rent, so it's paid by autopay. Keep each charge itemized so you can answer questions.
- Train anyone who sells it. Even a part-time helper must stick to what the provider allows them to say.
- Track proof of outside coverage. If you accept it, record the policy, the expiry date and set a reminder.
What to tell tenants
Plain wording works best:
Your belongings in the unit are not covered by our property insurance. You can protect them by (1) joining our protection plan for $X a month, or (2) giving us proof that your own policy covers storage. Please choose one at move-in.
Do not tell tenants that the plan covers things you have not verified in the terms. Do not call it insurance unless it is.
When tenants say no
If a tenant refuses a plan and has no proof of coverage, and your lease requires one, you have options: ask them to choose, accept a signed waiver if your attorney approves the form, or decline the rental. Whatever you pick, apply it the same way to everyone.
Mistakes to avoid
- Hiding the charge. Show it at checkout and on the ledger.
- Selling without a license where one is required.
- Over-promising coverage.
- Not tracking proof. An old policy page is not proof if it expired.
- Ignoring claims. Help the tenant start the claim quickly.
- Counting plan income as sure money. Contracts and enrollment can change.
- Forgetting taxes. Talk to your CPA about how to record this income.
Checklist
- Compare two providers in writing
- Attorney reviews contract and licensing
- Lease updated
- Online checkout shows plan and price
- Billing set up on ledger
- Process for proof of outside coverage
- Claims contact given to tenants
- Your own property and liability insurance reviewed. See self storage insurance basics
For a definition, see the glossary entries for tenant protection plan and tenant insurance. The Self Storage Association is a place to find education and legal resources on insurance questions.
This page is general information, not legal or insurance advice. Review your provider contract and lease with an attorney and your insurance agent.