Renters pay more for auto insurance, study finds
In case you were wondering, there is an invisible link between homeownership and car insurance. According to Consumer Federation of America’s new analysis of premium quotes from major auto insurance companies, consumers pay about 7 percent more, on average, for car insurance premiums if they rent their home rather than own it, regardless of their stellar driving records.
The report shows that renters paid an average of $112 more a year for auto insurance when compared to drivers who owned their homes. At some insurance companies, the basic liability insurance rate for renters was 47 percent more than it was for homeowners.
The report reflects that insurers’ evaluation of homeowner status hurts lower- and moderate-income people. Renters had a median income of $27,800 in 2013, compared with $63,400 for homeowners, according to Federal Reserve statistics.
“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said Robert Hunter, insurance director for the consumer federation. “A good driver is a good driver, whether she rents or owns her home.”
Jim Lynch, chief actuary for the Insurance Information Institute, didn’t dispute CFA’s findings, but said that different rates are “justified by underlying data” that shows homeowners are “more responsible” than renters and that renters are more likely to have accidents than owners, so the difference in rates are the result of “an actuarially justifiable variable.” One of the examples he gave was related to the fact that renters park in crowded surface lots, where the likelihood of accidents is higher than in homeowner’s driveways.
“It would be difficult to go to a homeowner and say, ‘We’re going to charge you the same rate because somebody else says that’s the way it ought to be.’ If I were that homeowner, I would say, ‘That’s not fair.’ But that’s how fairness operates in the insurance (industry),” Lynch said.
Knowing all this, how can one get the best rate on auto insurance?
Consumer advocates and insurance industry representatives agree that rates vary widely by insurer. So whatever you do, seek quotes from several companies. Moreover, remember that companies often offer discounts if a consumer buys more than one type of policy. Typically, a discount is given if a customer buys homeowner’s and auto coverage from the same insurer. Many companies also offer such “multi-line” discounts to customers purchasing renters insurance; just remember to ask if any discounts are available, such as those offered to good students or to people (especially those over 55) who take special driving classes.