Homeowners Insurance

Low-Income Homeowners Pay More for Insurance in Two-Thirds of U.S. States’ Largest Cities

Low-Income Homeowners Pay More for Insurance in Two-Thirds of U.S. States’ Largest Cities

The cost of insurance in the lowest-earning neighborhoods is lower than the cost of premiums in the highest-earning neighborhoods in just 9 states’ largest cities.
California suburb.
California suburb. Source: Getty Images

An analysis of the cost of home insurance in nearly every state's largest city reveals that residents living in lower-income areas pay $117 more a year, on average, than wealthier residents in the same cities. This is the case 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. But depending on the city and state, that figure can rise to 11% of the median income.

At the same time, when residents in low-income neighborhoods don’t face a higher cost for home insurance than those in high-income neighborhoods, they don’t see substantial savings — less than $100 a year in all but two cases.

Key findings

Residents in the lowest-earning neighborhoods pay higher home insurance rates in 34 states’ largest cities

Residents in a city's lowest-earning ZIP code pay $117 more a year, on average, for homeowners insurance than residents in the same city’s wealthiest ZIP code. Data shows that residents in low-income neighborhoods face higher home insurance costs in the largest cities in 34 states.

Low-earning residents are more likely to pay cheaper rates compared to the average cost of coverage than they are to pay more affordable rates compared to high-earning residents. In 14 cities, the rates that low-income residents pay are beneath the citywide average cost of home insurance. Conversely, the lowest-earning residents pay less than the wealthiest in nine cities.

A ValuePenguin analysis showing states where low-income customers pay $100 or more, on average, than high-income customers

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 largest gap exists in Michigan, where people living in Detroit's Ravendale neighborhood pay $1,919 more a year for home insurance than those living in the city's most affluent neighborhood — around Grosse Pointe Farms and south of the Ford House. Low-income residents living in Columbus, Ohio, New Orleans and Phoenix could also face substantial rate increases for home insurance.

In three cities — Honolulu, Charlotte, N.C., and Washington, D.C. — there is no cost difference between the highest- and lowest-earning neighborhoods. Conversely, there are nine cities where lower-earning residents pay less, on average, than their high-earning counterparts. In Billings, Mont., and Little Rock, Ark., low-income residents pay at least $100 less, on average, than wealthier dwellers. Where they get more affordable home insurance rates, low-income residents pay an average of $74 less than wealthier people from the same city.

{"backgroundColor":"white","content":"\u003C\/p\u003E\n\n\u003Cp\u003EResidents in a city's lowest-earning ZIP code pay $117 more a year, on average, for homeowners insurance than residents in the same city\u2019s wealthiest ZIP code. Data shows that residents in low-income neighborhoods face higher home insurance costs in the largest cities in 34 states.\u003C\/p\u003E\n\n\u003Cp\u003ELow-earning residents are more likely to pay cheaper rates compared to the \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root ShortcodeLink--black\" title=\"Average Cost of Homeowners Insurance\" href=\"https:\/\/www.valuepenguin.com\/average-cost-of-homeowners-insurance\"\u003Eaverage cost of coverage\u003C\/a\u003E\u003C\/span\u003E than they are to pay more affordable rates compared to high-earning residents. In 14 cities, the rates that low-income residents pay are beneath the citywide average cost of home insurance. Conversely, the lowest-earning residents pay less than the wealthiest in nine cities.\u003C\/p\u003E\n\n\u003Cp\u003E\u003Cdiv class=\"ShortcodeImageResponsive--root\"\u003E\n \u003Cfigure class=\"ShortcodeImage--root\"\u003E\n \u003Cpicture class=\"ShortcodeImage--picture\"\u003E\n \u003Csource\n media=\"(max-width: 1032.75px)\"\n data-srcset=\"http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_1.0,f_auto,h_1600,q_auto,w_1600\/v1\/states-low-vs-high-income_ifn23b 1x, http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_2.0,f_auto,h_1600,q_auto,w_1600\/v1\/states-low-vs-high-income_ifn23b 2x\"\n\/\u003E\n \u003Cimg alt=\"A ValuePenguin analysis showing states where low-income customers pay $100 or more, on average, than high-income customers\" class=\"lazyload\" data-src=\"http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_1.0,f_auto,h_1600,q_auto,w_1600\/v1\/states-low-vs-high-income_ifn23b\" src=\"http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_2.0,e_blur:1000,f_auto,h_1600,q_1,w_1600\/v1\/states-low-vs-high-income_ifn23b\" data-srcset=\"http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_1.0,f_auto,h_1600,q_auto,w_1600\/v1\/states-low-vs-high-income_ifn23b 1x, http:\/\/res.cloudinary.com\/value-penguin\/image\/upload\/c_limit,dpr_2.0,f_auto,h_1600,q_auto,w_1600\/v1\/states-low-vs-high-income_ifn23b 2x\"\u003E\n \u003C\/picture\u003E\n \u003C\/figure\u003E\n\u003C\/div\u003E\n\u003C\/p\u003E\n\n\u003Cp\u003EIn 15 states\u2019 largest cities, low-income residents pay annual home insurance rates that are at least $100 more expensive than those of wealthier policyholders. The largest gap exists in Michigan, where people living in Detroit's Ravendale neighborhood pay $1,919 more a year for \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root ShortcodeLink--black\" title=\"Best Cheap Home Insurance in Michigan\" href=\"https:\/\/www.valuepenguin.com\/best-cheap-homeowners-insurance-michigan\"\u003Ehome insurance\u003C\/a\u003E\u003C\/span\u003E than those living in the city's most affluent neighborhood \u2014 around Grosse Pointe Farms and south of the Ford House. Low-income residents living in Columbus, Ohio, New Orleans and Phoenix could also face substantial rate increases for home insurance.\u003C\/p\u003E\n\n\u003Cp\u003EIn three cities \u2014 Honolulu, Charlotte, N.C., and Washington, D.C. \u2014 there is no cost difference between the highest- and lowest-earning neighborhoods. Conversely, there are nine cities where lower-earning residents pay less, on average, than their high-earning counterparts. In Billings, Mont., and Little Rock, Ark., low-income residents pay at least $100 less, on average, than wealthier dwellers. Where they get more \u003Cspan\u003E\u003Ca class=\"ShortcodeLink--root ShortcodeLink--black\" title=\"Cheapest Home Insurance Companies\" href=\"https:\/\/www.valuepenguin.com\/cheapest-homeowners-insurance-companies\"\u003Eaffordable home insurance rates\u003C\/a\u003E\u003C\/span\u003E, low-income residents pay an average of $74 less than wealthier people from the same city.\u003C\/p\u003E\n\n\u003Cp\u003E","padding":"double"}

The insurance cost gap alone takes up as much as 11% of the lowest-earning residents' median income, though it varies depending on the city and state

The financial consequences for lower-income residents are more impactful where they pay higher home insurance rates than those charged to residents of wealthier neighborhoods. However, the scale of those consequences varies depending on the income level of the affected residents.

For example, residents in the lowest-earning neighborhood in Detroit pay $1,919 more a year than those living in the city's most affluent section — the largest gap found by researchers. Since this surcharge by itself amounts to 11% of the median earnings in the low-income neighborhood, the incomes of the affected residents are also the most adversely impacted by the rate increase.

Detroit is a unique case. It's the only largest city by state where the surcharge that low-income residents face corresponds to more than 3% of the local neighborhood's income. In fact, aside from Columbus, Ohio, Los Angeles, New Orleans, Phoenix and Omaha, Neb., the surcharges by themselves equate to 1% or less of the local median income. However, this doesn't mean that a surcharge isn't a burden, especially when viewed as part of the entire cost of coverage. Out of a median annual income across nearly every state’s largest city of $22,091, home insurance consumes 9% of the typical earner's yearly earnings.

Location
Percentage of income
Surcharge as percentage of income
Detroit, MI22%11%
Minneapolis, MN20%0%
Oklahoma City, OK19%0%
Los Angeles, CA18%2%
New Orleans, LA16%2%
Show All Rows

Who's affected by rate increases? It depends on the neighborhood

An analysis of the demographic breakdown of the cities in this study reveals that the largest cities' racial makeup is split nearly equally where the lowest-earning neighborhoods saw higher home insurance rates than wealthier areas.

In 34 cities where low-income neighborhoods are charged more for home insurance, 18 have a higher percentage of white residents than Black residents. In the other 16, there is a higher percentage of Black residents than white residents.

Low-income areas in which Black residents comprise at least 50% of the population 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.

What low-income homeowners can do about high insurance costs

The conditions that produce expensive home insurance rates for anyone, regardless of income level, may be exacerbated in low-income areas. Insurers often set higher rates in response to the frequency of natural disasters in an area. For example, a low-lying neighborhood that's home to low-income residents will face higher rates than average because, in part, its risk of flood damage is greater.

Homeowners or renters who face higher-than-average insurance rates may find cheaper coverage by comparing plans across insurers. Alternatively, they might take steps to weatherize their homes, or increase their security if high rates are a response to high rates of crime, especially burglary. Installing a dead bolt is likely one of the most cost-effective ways to quickly lower home insurance costs.

Methodology

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.

Because researchers defined the cities in this study according to ZIP code, there were some cities that were left out where ZIP codes stretched across areas wider than a single city. Where an area's three-digit postal service ZIP code prefix didn’t indicate that all residents of that area would have addresses in a given city, ValuePenguin excluded that city from its study. The cities excluded were:

  • Anchorage, Alaska
  • Charleston, S.C.
  • Burlington, Vt.
  • Virginia Beach, Va.
  • Cheyenne, Wyo.

In some cases, the lowest-earning ZIP code according to median income was attributable to a college campus. Though residents of a college campus are more likely to have lower incomes, on-campus housing is an environment that's different from that of a typical, low-earning resident of a city that’s not associated with a college. In these cases, researchers used data from the next-lowest earning ZIP code that didn't outline a college campus. Cities affected were:

  • Birmingham, Ala.
  • Atlanta
  • Baltimore
  • Boston
  • Minneapolis
  • Jackson, Miss.
  • Kansas City, Mo.
  • Columbus, Ohio
  • Omaha, Neb.
  • Fargo, N.D.
  • Providence, R.I.
  • Sioux Falls, S.D.
  • Nashville, Tenn.
  • Salt Lake City
  • Milwaukee

ValuePenguin's analysis used insurance rate data from Quadrant Information Services. These rates were publicly sourced from insurer filings and should be used for comparative purposes only, as your quotes may be different.