Homeowners Auto Insurance – Why the Big Discounts?

Calculation of premiums requires complex algorithms that try to take every possible risk into account. They are enigmatic to the point that every company uses proprietary pricing to help ensure their losses do not outweigh their profits. Of course they are businesses and need to make a profit. In the quest to lower losses, the industry has long searched for social, political, economic and behavioral factors that show a correlation to fewer claims. Across multiple studies and decades, insurers believe the difference between renting and owning is one such factor. That is mainly why they offer cheaper homeowners car insurance quotes.

Underwriting

This is an industry that is in the business of betting against large risks. In order to effectively carry out this task, for example, underwriters have to charge higher premiums to drivers with a DUI due to the fact that they are likely to repeat the offence. They are meant to offset the large losses if such a driver commits another DUI offense.

Home Owners Make Better Decisions

Underwriters need to constantly revise their algorithms and assess possible factors that will increase or decrease claims so that they can somehow meet the settlements and stay profitable. A long- held belief is that buying a house is a sign of increased social, moral and ethical behaviors that also lead to lower loss claims. An article published in Social Forces found that people who have the tittle to their house were 1.28 times more likely to be involved in community groups and 1.32 times more likely to join a civic association. It is argued that this increased social responsibility lead to safer decision-making once they get behind the steering wheel. And that is enough to charge less for homeowners automobile insurance.

Tenants Make More Claims

This assessment seems to be supported by another study conducted in 2015 that directly compared drivers that rented with those that didn’t. The study evaluated 700,000 respondents over a two year period and found that in the youngest age bracket 18 to 24, those that lived with their parents filed a high 24.4% claim rate, tenants were second at 19.7% and those that bought their apartment at this young age, only made claims 17.6% of the time. At 45 to 54 the difference between the three groups was only 1% and it was basically equal for the over 65 year old group. Companies feel justified in charging higher renters car insurance premiums because of this difference in loss suffered.

home ownership and vehicle insurance

Consumers

As a consumer you may feel it is unfair that having a property title on your name affects how much you pay for insuring automobiles. Yet the data collected supports the notion that they should get lower auto insurance rates. If the premiums are the same, they may lose significant revenues on higher risk categories and be inclined to raise prices across all policy holders. This may seem like a great idea from social standpoint. However, who would want to give up the discounts they can qualify and pay more as a result?

These comparisons are made throughout many different factors. For example, those with sports cars pay much more than those with minivans for obvious reasons. Although the system includes complex algorithms to account for different factors, it ensures that you, as a policyholder pay according to risk profile.

According to the Consumer Federation of America (CFA), as a renter you will pay on average 7% higher premiums, yet the rates can be quite significantly higher. For example, according to CFA data, in Louisville Kentucky, policyholders of renters vehicle insurance from Farmers paid on average 47% more.

Get the Discount, Avoid the Higher Cost

In the end, you either want to avoid the higher charges applied to you or ensure that you are getting the discount, depending on where you stand in this debate. Ignoring it all costs both sides one way or another. Also, it is clearly demonstrated how important it is to find the right provider for your circumstances. So, never ignore the power of shopping around for better deals because it clearly works.

Renters Auto Insurance

If you are a tenant you will need to be thorough in researching for the cheapest deal in town. Rates can differ significantly with insurers charging anywhere from 3% to 19% on average more for drivers who are living in a tenanted accommodation. However, within the CFA’s study, it uncovered that GEICO’s pricing were the same for both. Remember to use an online comparison tool like ours and get as many quotes as possible so that you avoid the companies that would apply the highest surcharge or offer the biggest savings.

Homeowners Vehicle Insurance

If you recently completed the purchase, now is the time to get the maximum discount. Keep in mind that you may have to switch to achieve it.

Although there is a call to put a stop to differentiating risks like this, it is something that would raise the costs across the board. This is an aspect that many including underwriters do not want.

The final point is that underwriters are allowed to make adjustments and consider the facts they deem relevant. So, motorists probably have to take it on face value and see if they can reduce the effects of certain negative factors. Again, shopping around for the best quotes is a very good way of just doing that.

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