Why Your Neighbor Is Paying Half as Much for Home Insurance

Imagine two houses on the same street—same size, same age, same everything.

But one homeowner will pay $1,200 a year to insure theirs, while another will pay $2,100. 

It might sound like a pricing error, but it isn’t. A recent Urban Institute analysis of mortgage and insurance data found this kind of gap is common nationally—and that it hits lower-income buyers hardest, even when comparing homes of similar value. 

Insurance professionals who work with buyers every day say the same thing: The gap usually doesn’t have to do with the home itself.

“Most people think insurance pricing is about the house. It’s not. It’s mostly about the person,” says John Espenschied, the founder and agency principal of Insurance Brokers Group, told Realtor.com.

“Two buyers can have the same home, same roof, same street, and still get very different prices.” 

What actually determines your premium

Home insurance premiums are built around risk: How likely is this specific property to generate a claim, and how costly would that claim be?

To answer that, insurers weigh things like the home’s structure, age, past improvements, location, and overall value.

On its face, that suggests two identical homes should carry identical premiums. Same structure, same age, same location, same value—same risk, same price.

But that’s not all insurers are pricing.

“Homeowners with a history of carrying insurance without filing a claim are viewed as a lower risk, so their premiums are calculated to be lower than those of someone who has filed a couple of claims in the past few years,” says Melanie Musson, a home insurance expert with Quote.com.

In other words, the person behind the policy—their claims history, their financial profile—factors into the price just as much as the house itself.

The hidden factor: Credit score

The biggest wild card, according to Espenschied, is credit—specifically, a separate insurance-based credit score that most buyers don’t know exists.

“The biggest driver I see every day is credit,” he says. “Insurers use credit-based insurance scores to predict risk. Lower scores tend to mean more claims over time, so the premium goes up.”

Musson confirms credit plays a real role in pricing, even though it isn’t intuitive.

“A credit score may seem unrelated to risk, but insurers cite statistics showing a higher likelihood of filing a claim with a low credit score,” she says.

For the same house, she says, the gap between a lower-risk and higher-risk owner can run “$20 to $200 a month or even more, depending on the risk level and the home value.”

Who this hits hardest

The burden of rising insurance costs doesn’t land evenly on buyers. It’s no surprise that higher-income buyers can absorb steeper premiums more easily—but the Urban Institute’s new analysis shows just how uneven that burden really is.

The Urban Institute’s review of mortgage and insurance data found that borrowers earning above 120% of the area median income pay about $2.10 less per $1,000 of home value than borrowers earning below 50% of the area median income, even when comparing homes of similar value.

The researchers found that the gap can’t be explained by property risk or hazard exposure alone. It comes down to a mix of factors, including the borrower’s own financial profile. The analysis also found a strong correlation between weaker credit scores and higher insurance burdens.

Espenschied has seen that correlation play out with his own clients, though he’s careful not to overstate it. 

“There is some correlation between income and credit-based insurance scores, but it’s far from absolute,” he says. “Lower-income buyers are statistically more likely to have lower scores, but individual financial behavior matters much more than income alone.”

Is that fair?

Espenschied is candid that this is largely unavoidable given how risk-based pricing works—but he doesn’t let insurers entirely off the hook, either.

“It’s largely an inherent trade-off of risk-based pricing, but there’s definitely room for improvement in how it’s communicated,” he says.

He cautions against assuming credit issues based on where someone lives or their apparent income: “You really can’t assume anything based on where someone lives. I’ve seen clients in modest neighborhoods with excellent credit, and the opposite in higher-end areas.”

That distinction matters: Individual exceptions don’t erase the population-level pattern the Urban Institute identified. Plenty of lower-income buyers have excellent credit, and the aggregate data still shows income-linked pricing disparities across the market as a whole.

Espenschied adds that most buyers have no idea any of this is happening until it’s too late.

“In most cases, it comes as a surprise. Credit-based insurance scoring isn’t widely understood by consumers, particularly among lower-income buyers.”

What buyers can do

The good news: Several factors that drive up a premium are within a buyer’s control. Musson recommends comparing quotes across multiple companies before settling on a policy, and says two of the simplest levers are often overlooked. 

“You can increase your deductible to get a lower premium,” she says. “Bundling home and auto insurance almost always results in a discount.”

Since insurers are pricing the physical condition of the home as much as the buyer, upgrades can move the number, too—and Espenschied says one improvement tends to matter more than people expect.

He estimates that replacing an older roof can cut a premium by 20% to 40%, depending on the carrier and the roof’s prior condition. 

“Roof claims are one of the most frequent and costly losses insurers face, and newer roofs tend to perform much better, which directly reduces risk and improves pricing,” he says.

Because so much of the price comes down to the buyer rather than the house, both agree it pays to ask questions early. Musson suggests getting quotes before making an offer so the cost isn’t a surprise at closing, while Espenschied recommends buyers ask their insurer directly what’s shaping their number.

Insurance pricing isn’t just about the house. It’s about the buyer, too: Credit history and claims record can move the number as much as the roof or the ZIP code. For buyers on tighter budgets, that combination often means paying more, proportionally, for the same coverage as their higher-income neighbors. Knowing what’s actually driving your premium is the first step to lowering it.