Understanding the New Coverage Limitations for Weather-Related Roof Damage

457505135The unusual frequency and severity of wind and hail storms over the past few years has had a pronounced effect on both property owners and the insurance industry. Insurance companies have reported record losses for residential and commercial properties, and the industry has been forced to make adjustments as a result of these changing weather patterns.

The self-storage industry also is feeling the effects. With a high concentration of self-storage facilities located in areas prone to severe wind, hail and tornadoes, insurance property losses and specifically roof damage have soared into the millions in the past five years.

In response to the changing weather patterns and resulting claim activity, insurance companies are rolling out a number of limitations related to self-storage facility roofing damage caused by hail and wind. An insurance policy was never designed to be a maintenance contract, and these new limitations are an effort on the part of the insurance industry to clarify coverage terms and mitigate the severity of losses related to severe weather. In some instances, a property owner may find that a quote is subject to the acceptance of some of the limitations noted below.

Cosmetic Loss Limitation Endorsement – Limits coverage for cosmetic loss to roofs.
Actual Cash Value Endorsement – Roof damage is adjusted based on the depreciated value of the roof.
Percentage Deductibles – May impose a deductible upward of 10 percent of the property value for wind and hail damage.

If you write self-storage business in areas prone to severe wind and hail damage, be aware that these insurance changes have become more prevalent and could impact your clients’ exposure in the event of a loss. Work with them to review any new coverage limitations and discuss their potential financial exposure should a loss occur. To cover deductibles and out-of-pocket expenses in the event of a severe loss, self-storage business owners may wish to reserve funds or secure a line of credit. Failure to do so may translate into construction delays or an inability to resume regular business operations in a timely manner following a loss.

When considering risk management, awareness is always the first important step. It is important to work with your clients now to develop and implement a plan to address potential costly financial losses in the future.

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