Renters pay up to 11% more for car insurance than homeowners
Do you pay ‘rental tax’ on your car insurance? We reveal how renters’ premiums can be 11% higher than homeowners’ – and how to avoid it
- Those who rent a house from landlords have to pay more for their car coverage
- Insurers consider renters to be riskier, so they charge higher premiums as a result
- But not all insurers raise prices this way, so shopping around is key
Renters can pay up to 11 percent more for auto insurance compared to homeowners, our research found, as insurers charge a premium for what they consider to be a greater risk.
The little-known price variance means renters may end up paying significantly more for coverage — but some, but some insurers don’t charge extra, which means shopping around is essential.
Insurers charge tenants more because they cause more damage on average.
There are a wide variety of reasons for this, although how insurers set their prices is a closely guarded commercial secret.
But renters are generally younger than homeowners and therefore have limited driving experience, resulting in more accidents.
Driving away: Tenants face higher insurance premiums than people with mortgages, but it all depends on which insurer you go with
Many rent in cities, which entails a greater risk of theft. Renters also park on the road rather than the driveway, increasing the likelihood of theft or accidental damage to the vehicle.
Aside from these practical drivers, homeowners also tend to have better credit scores than renters.
This is because mortgage payments count towards credit, but rent payments largely do not, and this can also affect premiums.
To illustrate how renters pay more, we went to each of the four major comparison websites and pretended to be a 35-year-old owner of a Honda Jazz.
We compared the premiums we were offered when we said we were homeowners with those offered when we said we were renters – the rest of the details stayed the same.
The overall cheapest price for a homeowner with this car was £313.27 per annum, for comprehensive telematics insurance from Ticker through Confused.
That rises by 6.2 per cent to £332.80 a year for a hirer – although with Telematics insurance how much you pay will depend on how you drive.
The insurer uses a system in your car to monitor your driving behavior, either via a separate device or via the driver’s smartphone.
The cheapest quote for a homeowner on GoCompare was £363.95 per year for comprehensive cover, with a telematics policy from insurer Hastings YouDrive.
| Insurer | Homeowner quote | Tenant quote | Difference |
|---|---|---|---|
| GoCompare | |||
| Hastings YouDrive | £363.95 | £404.03 | 11% |
| Hastings Essential | £454.71 | £497.64 | 9.4% |
| Current | £458.57 | £485.34 | 5.8% |
| You drive | £490.97 | £490.97 | 0% |
| Money supermarket | |||
| Admiral Essential | £498.64 | £527.40 | 5.7% |
| Admiral | £514.05 | £543.70 | 5.6% |
| Elephant | £519.19 | £549.17 | 5.7% |
| Diamond | £524.35 | £554.60 | 5.7% |
| Compare TheMarket | |||
| Current | £367.64 | £377.03 | 2.5% |
| Hastings Essential | £394 | £406.28 | 3.11% |
| Hastings directly | £417.67 | £437.22 | 3.11% |
| Ticker | £418.01 | £425.77 | 1.8% |
| Confused | |||
| Ticker Pay per mile | £313.27 | £332.80 | 6.2% |
| Current | £367.57 | £389.65 | 6% |
| Hastings Essential | £396.54 | £409.56 | 3.2% |
| Ticker | £410.22 | £417.80 | 1.8% |
That premium increases by 11 per cent to £404.03 for a tenant – the highest increase we’ve found.
Similarly, the lowest price for our sample driver on CompareTheMarket was £367.64, from Flow – again, for a homeowner. That rises by 2.5 per cent to £377.03 a year for those with a landlord.
But one insurance company in our test didn’t charge a renter extra for insuring a car.
That was from estate agent U Drive Cover, who charged £490.97 for both tenants and homeowners, via price comparison website GoCompare.
How to save money on your car insurance as a renter
The best course of action is to take your time and shop around.
Using different price comparison websites can lead to very different prices, and remember that major insurance companies such as Direct Line and Aviva are not listed on these websites.
There can also be a big difference between the same insurance company on different price comparison websites.
For example, Flow charged our Honda Jazz driver who rented £485.34 on GoCompare, £377.03 on CompareTheMarket and £389.65 on Confused.
That price difference reflects different inquiries from different price comparison websites, leading to a different risk profile of the same driver – and therefore a varying premium.