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Do renters pay more for car insurance?


A

Question: Does renting instead of owning a home cause my car insurance rates to be higher?

Answer:  Drivers who rent their residence may indeed pay a bit more for car insurance than those who own their home.  You aren’t being penalized with a surcharge for renting; instead the cost difference usually boils down to discounts given out by auto insurers to homeowners.

Owning a home -- whether it’s a house, condo or townhouse -- tends to get drivers a discount or reduction in their base rate.  The typical homeowner’s discount offered by insurers may be up to 5 percent; however, we found the average for all states to just under 2 percent.

The reason for the discount is that homeowners tend to be file fewer claims. This makes homeowners less of a risk to car insurance companies -- and less risk equals lower rates.

Rating Factors

There is good news though for renters: Owning a home is just one of the rating factors looked at by car insurance companies to determine rates and/or discounts on coverage. Other common risk factors that auto insurers use to calculate your final premium include items such as:

  • Gender
  • Age
  • Geographical location
  • Credit rating
  • Marital status
  • Driving record
  • Years of driving experience
  • Claims history
  • Vehicle type
  • Vehicle use
  • Chosen coverage types and limits

This is not a comprehensive list, and the risk factors vary by car insurance company.  Also, state laws make a difference on rates from one state to another since insurance laws vary.

For example, California doesn’t allow auto insurers to use your credit score to determine your car insurance rate and your ZIP code can only be used as a secondary rating factor.

Also, keep in mind even if two car insurance companies were to use the exact same rating factors, the weight each insurer gives to the various risks would differ -- thus, car insurance rates vary greatly from one insurer to the next.

Other discounts may apply

If you aren’t buying a home soon but want discounted car insurance, don’t despair. There are other discounts that you may be eligible for, such as a multi-policy discount.

We found the average discount for all states for having both renters insurance and car insurance with the same company was just under 5 percent. 

When you buy a home that discount could go up.  Nationwide we found an average 7.8 percent multi-policy discount for drivers who bundled home and auto policies with the same insurer. (Another reason that homeowners may pay less than renters for their auto policy.)

There are plenty of other discounts that don’t vary whether you rent or own a home, such as:

  • Good driver
  • Payment in full
  • Multi-vehicle (insure more than one vehicle with the same insurer)
  • Automatic payment
  • Going green (paperless)

Visit our car insurance discounts guide for more details on these and other possible discount.  

Keep in mind whether you rent or own your home, the best way to get cheap car insurance is to shop around.  Some insurers may offer great discounts, but high overall rates.  By comparison shopping, you can find the insurer that has the best overall rates and best fulfills your household needs.

More articles from Penny Gusner


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