Jona Strickland is no longer a homeowner. In 2021, she sold her home in Folkestone, Georgia, and approached her family in Boise, Idaho. It wasn’t her desire to get close to her relatives that she had her sign “for sale.” She was tired of possession.
“The stress (had been) in owning a home and maintaining and improving my property took a large portion of my free time and money,” she told Bankrate. “I wanted someone else to worry about the fence falling and spending my time and money in other ways.”
Now she’s renting an apartment in North End, a neighborhood that she describes as one of Boise’s best. By renting, Strickland says she can live in a neighborhood where the price is paid if she is buying. Plus, by moving to the North End, Strickland says she is living the life she actually wanted.
Strickland isn’t just making switches. Rentals are more affordable than buying at all 50 metros in the US, according to Bankrate’s Rent vs. Buy Study. In some cities, namely San Francisco, San Jose and Seattle, ownership costs more than twice as much as rentals.
Insurance is just one factor in your monthly housing budget for both tenants and homeowners. If you have a mortgage, your lender will probably make sure you carry the home insurance. If you are a tenant, your landlord may insure you as part of your lease agreement. To see whether premiums could explain the gap between ownership and rental affordability, Bankrate analyzed the average homeowner and tenant premiums from the Insurance Information Institute (TRIPLE-I) from 2007 to 2021. The pace of increased homeowners’ insurance has far surpassed the rate of rental insurance, which has doubled over 14 years.
Renter insurance is cheaper, and homeowners’ insurance is more expensive
To compare premiums for homeowners and tenants, Bankrate analyzed the average premium data from Triple-I. The average rate weight from 2007 to 2021 is the latest available year. Our team also used data from the Bureau of Labor Statistics to explain inflation and translate all dollar figures to $2021.
The difference in cost between rental and home warranty has increased significantly. In 2007, the national average cost of homeowner insurance was 352% higher than tenant insurance. By 2021, homeowners’ insurance costs 730% more than tenant insurance. This is an increase of 378 percentage points. In terms of annual premiums, renters paid an average of $238 per year on the policy in 2007, while homeowners paid $1,074. By 2021, tenants paid $170 a year, and homeowners faced bills of $1,411 a year.
Homeowners’ insurance has risen to inflation
It’s more expensive to guarantee a home, but in reality it’s cheaper to guarantee an apartment. Between 2007 and 2021, the average annual cost of tenant insurance went from $238 to $170. This is a DIP of 28% or more. Meanwhile, the average annual cost of homeowner insurance has increased by more than 31%, moving from $1,074 per year to $1,411 per year. This is on par with the consumer price index that economists use to measure inflation. This increased nearly 31% over the same time frame.
Why are homeowners more expensive than tenants?
Part of the reason renters’ insurance interest rates are significantly lower is the nature of what insurance covers. Renter’s insurance primarily covers your personal belongings and liability exposure. If the building is damaged – as a tenant, you don’t have to pay for it if a storm blows shingles and basement floods from the roof. When you own your home, you own it from the roof to the foundation and if your home is suffering from the risk of the covered policy, your home insurance will help you cover those repairs. Home insurance claims can quickly become expensive. In fact, according to Triple-I, claims for property damage including fire and lightning, flood and freeze, wind and ail, theft, vandalism, malicious pranks, theft, vandalism, theft, vandalism, malicious pranks.
Nationwide, home insurance costs have been steadily leaning over the past few years. Insurance is a complex product, and its prices can fluctuate due to a variety of things. How much you pay for your policy depends in part on factors that are personal to you as a homeowner, such as your credit history, martial arts status, and whether you have filed a claim in the past. However, what affects your home’s premiums has nothing to do with you as a homeowner. If the insurance company pays more claims than it was collected on the premium, it could potentially raise the fees across the board to get the money back. Alternatively, if reconstruction costs rise, household insurance premiums are expected to rise too.
“There is concern that political developments could exacerbate both of these issues. For example, rising tariffs on key inputs such as steel, aluminum and wood can be expensive to build and repair homes.
10 states with the biggest gap between renters and homeowners’ premiums
The cost gap between renters and homeowners’ premiums has grown the most in Oklahoma. In 2007, the premium gap between tenants and homeowners was $1,086 per year. By 2021, the difference in costs between these two policy types had increased to $1,934, a rise of $848. Oklahoma sits in the middle of a tornado alley and becomes a hotbed for wind and hail damage. If the region tends to cause certain types of losses, you can usually expect home insurance fees to be more expensive.
The premium gap between renters and homeowners from 2007 to 2021 increased by more than $600 in Colorado, Rhode Island and Nebraska.
10 states with the smallest gap between tenants and homeowners’ premiums
Some states have narrowed the gap between average tenant and homeowner premiums. Bankrate analysis shows that the difference in the cost of renters and homeowners insurance fell by $53 in Delaware from 2007 to 2021. The premium gap between tenants and homeowners increased by less than $100 in Nevada and Michigan over the same period.
My home’s insurance premiums have risen. What can I do about it?
Rising homeowner insurance costs have been a major problem in some parts of the country. If you get hit with an eye-opening premium when your policy is updated, these strategies may help you recover costs.
- Bundling coverage: If you haven’t already, bundle your car and home insurance together can save you a lot of money. For many insurance companies, home and car bundles save the most compared to other discounts.
- Choose one that is highly deductible: Choosing a higher deductible means paying more out-of-pocket if you need to file a claim. However, this means that your premiums will be lower.
- Improving your credits: In most states, insurance companies can use your credit history to price your insurance policy. Taking steps to improve your credit will significantly reduce your home insurance costs.
- Dealing with roof repairs:Roofs that need repairs are also more expensive. Even getting your roof inspected, fixing the problem and replacing the roof with something more damage resistant can cost more positively, but it can also result in greater long-term savings and security that you won’t be dropped.
