Renters are getting a bad deal on auto insurance, compared to homeowners — even if they pay their rent on time and have clean driving records.
Major auto insurance companies charge good drivers as much as 47 percent more for basic liability auto insurance if they don’t own their home, according to a new analysis of premiums by the nonprofit Consumer Federation of America (CFA).
Based on a sampling of insurance quotes nationwide for a 30-year old safe driver, the CFA found that premiums averaged 7 percent higher – about $112 per year – for drivers who rent instead of own homes.
Liberty Mutual penalized renters the most with premium hikes averaging $307 per year, or 19 percent more, for state mandated auto insurance coverage. Geico was the only company tested that did not consider homeownership status in any of the 10 cities. The only premium decrease for renters was found in Chicago, where Allstate lowered rates by 11 percent compared with premiums for homeowners.
The use of homeownership status in pricing disadvantages low- and moderate-income renters, according to CFA. Federal Reserve Board data show that the median income of renters in the U.S. was $27,800 in 2013, compared with $63,400 for homeowners.
“To raise people’s auto insurance premium because they can’t afford to buy their homes unfairly discriminates against lower-income drivers,” said J. Robert Hunter, CFA’s Insurance Director and the former Insurance Commissioner of Texas. “A good driver is a good driver whether she rents or owns her home. Insurance companies should not be allowed to target people based on homeownership status.”
For the analysis, CFA tested rates for minimum limits liability coverage in 10 cities from the nation’s largest insurers – State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual, and Nationwide.
CFA used company websites to solicit two premiums in each city for a 30-year old female motorist who has a 2005 Honda Civic and a perfect driving record. The only characteristic that was altered during the testing was whether she owned or rented her home. (A complete list of driver characteristics is included in Appendix One.)
While the average increase for renters was six percent, there were several double-digit percentage increases around the country. For example, Allstate charged renters in Tampa 19 percent more than it charged homeowners; Liberty Mutual charged Baltimore renters 23 percent more and 26 percent more in Newark; and Farmers Insurance charged renters in Louisville 47 percent more (or $768) than homeowners for a basic auto insurance policy.