NEW YORK, May 5, 2021 A new ValuePenguin.com analysis of the cost of home insurance revealed that homeowners living in lower-income areas pay $117 more, on average, than wealthier residents. This gap is especially pronounced in the largest cities in 34 states, or two-thirds of states across the U.S. The ‘surcharge’ that low-income homeowners face equals 1% of the median income, on average, across the largest cities’ lowest-earning neighborhoods. In some states, that figure can rise to 11% of the median income.
The lowest-earning Americans are often charged higher rates for home insurance than wealthier residents of the same city. Across the nation’s largest cities by state, residents in the lowest-income ZIP codes pay $117 more a year, on average, than residents in the highest-income ZIP codes.
The lowest-income neighborhoods pay more for home insurance than the wealthiest neighborhoods in 34 states’ largest cities. In three cities, there is no cost difference. In 30 states’ largest cities, the lowest-income neighborhood pays more for insurance than the citywide average.
The biggest gap in home insurance costs were found in Detroit Michigan, Columbus, Ohio, New Orleans, Louisiana, Phoenix, Arizona and Jackson, Mississippi. In 15 states’ largest cities, low-income residents pay annual home insurance rates that are at least $100 more expensive than those of wealthier policyholders.
The cost of home insurance in Detroit’s lowest-earning neighborhood is $1,919 a year more than it is for the city’s highest-earning neighborhood — the largest gap among the cities analyzed. This gap alone equates to 11% of the median income in the city’s lowest-earning ZIP code.
In low-income areas where Black residents comprise at least 50% of the population – homeowners face higher total upcharges on home insurance. Compared to wealthier parts of the same city, these ZIP codes are, on average, charged a combined $3,514 more for coverage. Meanwhile, across low-income areas in which white residents comprise at least 50% of the population, the total increased cost relative to high-income sections of the same city amounts to a combined $2,057 a year.
In nine states’ largest cities, the lowest-earning residents get a better deal on the cost of home insurance than their wealthier counterparts. Of these cities, the cost of coverage for low-income residents in Billings, Mont., and Little Rock, Ark., are the lowest relative to the wealthier neighborhoods than in any other city.
According to Andrew Hurst, Insurance Data analyst at ValuePenguin.com, “The conditions that produce expensive home insurance rates for anyone, regardless of income level, may be exacerbated in low-income areas.” He adds, ” Homeowners or renters who face higher-than-average insurance rates can find cheaper coverage by comparing plans across insurers. Alternatively, take steps to increase your security if high rates are a response to high rates of crime, especially burglary. Installing a deadbolt is one of the most cost-effective ways to quickly lower home insurance costs.”
ValuePenguin researchers used the U.S. Postal Service’s three-digit ZIP code designations to determine the boundaries of the largest cities in every state, then calculated the cost of coverage across every ZIP code within those cities. By using the U.S. Census Bureau’s five-year estimates (2015 to 2019) for the median income of earners in these ZIP codes, researchers analyzed the relationship between premiums and earnings.
ValuePenguin and its parent company, LendingTree® (NASDAQ: TREE), have a common mission: to empower consumers with tools, information, and resources to help them make smarter, more informed financial decisions.