Linda pays $2,408 a year for car insurance – to get a policy providing theminimum coverage required by Kentucky – through Farmers Insurance. Meanwhile, Lily pays Farmers $1,640 for the exact same coverage. So why is Sally paying 47 percent more than Suzy for the same insurance?
According to the Consumer Federation of America, Linda is forced to pony up more cash for insurance because she's arenter and Lily is a homeowner.
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That's right. The CFA – which recently conducted an analysis of premium quotes from the major auto insurers for a 30-year-old safe driver in 10 cities across the United States – found that consumers pay an average of 7% more (about $112 a year) for auto insurance if they write a rent check rather than a mortgage check for their home.
Depending on the insurer and where drivers live, they could be like Linda — paying upwards of 47% more for insurance. For example, Allstate's auto insurance quote for a renter in Tampa, Florida, was 19% more than a homeowner. In Baltimore, Liberty Mutual charged renters 23% more.
The CFA maintains that auto insurance companies' use of homeownership status in pricing leaves low- and moderate-income Americans at an unfair disadvantage. According to Federal Reserve Board data, the median income of renters in the United States was $27,800 in 2014, compared with $63,400 for homeowners.
"To raise people's auto insurance premium because they can not afford to buy their homes unfairly discriminates against lower-income drivers," said CFA Insurance Director J. Robert Hunter in a prepared statement. "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."
The CFA obtained quotes from Geico, State Farm, Allstate, Farmers, Progressive, Liberty Mutual and Nationwide. Geico was the only insurer whose quotes were the same, regardless of the driver's homeownership status.
"Virtually every state requires drivers to buy insurance, but we shouldn't force them to buy a home in order to get the best price," Hunter said. "State insurance commissioners and elected representatives should step in and stop this practice," he added.