Ancillary revenue has been gaining popularity in the residential rental market, especially over the last few years. As landlords aim to combat inflation and economic turbulence, many are seeking to generate income through supplementary sources to increase profits and diversify their revenue.
Renters insurance is an oft overlooked channel that property managers can use to drive additional profits while also improving the resident experience. Let’s talk about why renters insurance is a great option for generating more income for your rental business.
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Generating Ancillary Revenue in Residential Rentals
In an unstable housing market, property managers are increasingly turning to ancillary revenue channels to supplement their rental income. The success of these programs hinges on creating a positive resident experience, which in turn leads to better retention rates and potentially more referrals.
When it comes to building a sustainable revenue stream, it’s important to find a product or service that provides real value for your residents. For instance, many property managers launch programs connecting their renters to vendors, such as pet sitters, personal trainers, housekeeping, and more. Some also bulk up their infrastructure to offer on-site wifi or EV charging stations, which they can often provide at a discounted rate compared to external providers.
While these programs are often successful in providing a win-win for residents and property managers, they’re not always realistic for every community due to the upfront investment required. Whether you’re incurring building costs or just spending time organizing sponsored events, you’ll need to cover some startup costs before you can even begin seeing revenue.
This makes it difficult for property managers with a limited budget, or those who are catering to a smaller community. That’s why many are seeking lower-lift, more accessible programs to generate additional revenue.
The advantages of renters insurance as a supplementary revenue channel
If you’re looking for low-hanging fruit to diversify your income streams, you’ll want to start by looking at your renters insurance program. Building an insurance partnership program is a quick and easy option for earning ancillary income regardless of your setup, offering a few key benefits:
1. It’s accessible for communities of all sizes
Renters insurance partnerships can be implemented for property management companies of any size. Whether you manage a single small apartment building or oversee thousands of units across multiple communities, you can negotiate a partnership agreement to fit your business.
Insurance providers often have flexible options to accommodate different scales of operation, making it a viable revenue stream for both boutique property managers and large-scale real estate companies.
2. It requires minimal effort to set up
Implementing an insurance partner program is surprisingly straightforward, especially when leveraging modern applications to connect with carriers. Solutions like CheckMy Resident offer embedded options directly integrated into your insurance verification process, allowing renters to purchase a policy from a partner carrier in seconds.
Once set up, the system largely runs itself, requiring little ongoing management from your team. This low-maintenance approach allows you to generate additional revenue while actually reducing your workload.
3. It isn’t limited by your residents’ finances
Many common ancillary revenue streams rely on levying additional charges on your residents. While package system memberships and amenity fees may be profitable at first, overdoing it can cause your tenants to feel nickeled and dimed – or even price them out of your building altogether.
Contrastingly, establishing an insurance partnership doesn’t pose any additional cost for your resident. Instead, it relies on them purchasing renters insurance, which is already required by the vast majority of buildings, including 84% of multifamily communities. That means all you have to do is provide your tenants with affordable insurance policy options, and the carrier pays you a fee in exchange for your referral.
3 Steps to a Profitable Renters Insurance Program
1. Clean up your renters insurance practices
To launch a revenue-generating renters insurance program, you need to start by reviewing your existing practices. Take a look at where renters insurance comes up in the resident experience, from lease signing to move-out. From there, you’ll need to standardize your process.
Provide proper training and resources for your leasing office
Standardizing your renters insurance process starts with training your staff. Ensuring your leasing office staff is well-versed in your renters insurance policies is crucial for successful implementation.
Provide comprehensive resources that cover the value of renters insurance and your building’s requirements, as well as how to effectively communicate these to tenants. By equipping your team with the right knowledge and tools, you’ll ensure consistent messaging and smoother policy enforcement across your properties.
Add clear renters insurance requirements to your lease
In order to legally enforce coverage for your tenants, you’ll need to incorporate specific renters insurance requirements into your lease agreement. Work with your legal counsel to draft a clear, concise clause that outlines the exact coverage requirements, including minimum liability limits and potential consequences for non-compliance.
Be sure to specify how and when tenants need to verify their coverage. Having these requirements explicitly stated in the lease not only protects your property but also sets clear expectations for tenants from the outset of their tenancy.
See this example from a large property management company:
Renter’s Insurance & Tenant Property. It is understood that all of Tenant’s personal property in the apartment and elsewhere in the building shall be stored at Tenant’s risk. Landlord does not insure Tenant’s personal property against loss for any reason. Storage, if available, is unsecured and is provided at Tenant’s risk. Tenant agrees to have renter’s insurance with at least $100,000 of liability coverage in place prior to moving into the apartment, maintain such insurance during the term of the Lease and name the Landlord as an additional interested party. If the tenant does not provide proof of insurance or fails to maintain insurance at any time during term of the lease, it shall be a material lease violation and the landlord may terminate the lease and/or procure liability insurance and charge back the costs and administrative fees as additional interest.
Implement automated insurance verification
While verification is the most critical step in your renters insurance program, it’s also often the most manual. Leveraging modern tech in the insurance verification process can significantly reduce administrative burden while also improving accuracy.
CheckMy Resident provides real-time transparency into your tenant’s insurance policy with an AI-powered engine that ensures the coverage is active, accurate, and adequate. It also includes the option to monitor coverage on a monthly basis, verifying that the policy meets your building requirements, with no work required on the property manager side. By automating this process, you’ll save time, reduce human error, and ensure consistent compliance across your properties.
2. Create a streamlined flow
To ensure maximum adoption and a good resident experience, you’ll want to build out a flow to help your community set up their renters insurance as easily as possible.
While this may look different for every community, here are a few recommendations:
Welcome email
In your initial welcome email after the lease signing, you’ll want to include a mention of your renters insurance requirement. This gives your residents more time to assess their options before move-in.
See this example from a high-rise building under a large luxury property management company:
Educational content on renters insurance
While many tenants will buy a renters insurance policy simply because it’s required by their building, it doesn’t hurt to connect the dots for them. Providing them with resources about how renters insurance works and the protection it offers can help improve adoption more quickly. Start with this blog post about the top benefits of renters insurance for residents.
Renters insurance reminder email
Before your resident’s move-in date, it’s important to make sure they have all the details they need about your renters insurance program in one place. A great way to do this is by sending out an information email with your building’s requirements, recommendations for how to get renters insurance, and a step-by-step of how to verify their policy with your leasing office.
Here’s an example informational email from a large property company:
3. Establish partnerships with insurance carriers
To start turning your renters insurance program into a revenue stream, you need to establish carrier, broker, or insurance-related partnerships. With these agreements, you’ll typically promote their services as an option for your residents, then in turn make a commission for each policy purchased.
Many landlords will implement this system by choosing one carrier and offering it as a first choice when communicating the renters insurance requirement to new residents. Some will also automatically opt in any renters who don’t provide proof of insurance by the specified deadline.
However, some renters insurance solutions enable landlords and property managers to partner with multiple carriers at once. Through CheckMy Resident’s embedded insurance options, you can present your tenants with a variety of providers and receive a kickback from whichever they choose. Reach out to our team to learn more about how to set this up.
Get Started Now
Ready to revamp your renters insurance program and start generating revenue? Learn more about what mistakes to avoid (and what to do instead) with our free eBook The Seven Deadly Sins of Renters Insurance for Property Management.