Home Renters Dinged on Car Insurance

May 4, 2016

Good drivers pay more for auto insurance if they rent, rather than own, their home, according to new research by the nonprofit Consumer Federation of America.

“I don’t think it’s fair,” renter Autumn Yoakum said.  “There’s no difference between me and a homeowner besides a mortgage.”

Said renter Karim Maghaaoui: “If you’re a good driver, your insurance should be lower.”

The average increase in 10 states surveyed showed renters were charged 7 percent more for their premiums, an average of $112 a year.

“That’s a huge tax to pay simply because you’re a renter,” said Doug Heller with the Consumer Federation of America. “It makes no sense that if you’re a good driver, if you have a perfect record — no tickets, no accidents — but you rent, rather than own your home, that you should pay a dime more. There is no sense and no logic to it, and more importantly, it’s not fair.”

Renters pay more

To do the research, Consumer Federation of America got online quotes from the nation’s largest insurance carriers, including State Farm, Geico, Allstate, Progressive, Farmers, Liberty Mutual and Nationwide.

CFA used the same profile with these criteria: A 30-year-old, single female, working as a secretary, driving a 2005 Honda Civic, no accidents, moving violations or license suspensions. The only difference:  one profile was submitted as a homeowner; the other as a renter.

In Tampa, the only Florida city sampled, Allstate charged renters 19 percent more and Liberty Mutual charged 23 percent more.

The highest increase was in Louisville, Kentucky. Farmers charged renters there an average of 47 percent more.

Tampa homeowner Liz Fay was shocked to hear of the practice and the amount of disparity in premiums.

“I’m happy for me, but that’s not fair,” she said. “How can they do that?”

Although most of the insurance companies surveyed used homeownership as a factor, not all did. CFA says Geico, for example, did not ask whether applicants were homeowners. To see the results of the research, click here.

Low and moderate income penalty

CFA says the practice penalizes low- and moderate-income people.

“The average income of a renter is about half of that of a homeowner, so people who are already struggling financially on average are now asked to pay more for their auto insurance, despite their perfect driving record,” Heller said.

Instead of homeownership, CFA and renters say the fair thing to do is to base rates on your driving.

“What are you using your car for? How far are you going? What are you doing? Do you tour with a band or do you just go to and from work?” said Yoakum, who is a renter.

Changing the law

CFA is calling for lawmakers and regulators to do more to help consumers.

“Regulators and legislators are supposed to be there for us, but right now, what we find is they’re just letting the insurance companies charge whatever they want to whomever they want, even though they all require us to buy the product,” Heller said.

Unfortunately, when it comes to the renters’ disadvantage, there’s not much you can do about it, unless the law is changed to prohibit insurance companies from considering homeownership as a factor in determining rates. So far, two states have already done that: California and Massachusetts.

Angie’s Consumer Wise segment airs weekly on Tampa’s Bay News 9 and Orlando’s News 13