Homeowners living in predominantly Black and Hispanic neighborhoods are paying hundreds—even thousands—more per year for the same homeowners insurance coverage as homeowners in white neighborhoods, according to a new research report from the Consumer Federation of America (CFA).
The nonprofit research and advocacy group found that the average cost of homeowners insurance rose by 24% in the U.S. from 2021 to 2024. But the average homeowner in a predominantly Black neighborhood paid 16% more annually than one in a predominantly white neighborhood for identical coverage. Meanwhile, the average homeowner in a predominantly Hispanic neighborhood paid 30% more, or $500 and $950 extra per year, respectively. Over the life of a 30-year mortgage, those gaps grow to $15,000 and $28,500 for each group.
The CFA calls the disparity the “racial premium gap.” Researchers say it raises new questions about modern-day redlining in the insurance industry.
The study analyzed 216,151 test insurance quotes across nearly 33,000 residential ZIP codes using proprietary data from Quadrant Information Services. The quotes represent what insurers would charge a hypothetical, identical homeowner with the same credit score, the same $350,000 replacement value and the same-age home. The only difference? The location.
Researchers then cross-referenced those ZIP codes with Census Bureau data to classify neighborhoods by their predominant racial or ethnic makeup.
The report notes that because the underlying coverages and homeowner profiles are identical, the pricing gap can’t be explained away by differences in what people own or how they insure it. The insurance industry typically pushes back against cost disparities, which it attributes to differences in home age, construction or claims history.
Premium gaps top 50% in certain states
The CFA’s state-by-state breakdown showed even deeper cost gaps.
Michigan, for instance, topped the list for the largest Black-white premium gap, with homeowners in predominantly Black communities charged 74% more—an average of $1,768 a year—than homeowners in predominantly white neighborhoods for the same coverage. Pennsylvania was next at 57%, with New Jersey, Massachusetts and New York rounding out the top five (but with much smaller gaps).
In Hispanic communities, Florida led in overcharging on premiums, with homeowners in those areas paying 58% more compared to homeowners in predominantly white neighborhoods, or $5,014 a year. New York and Washington state followed, with gaps of 20% and 18%, respectively.
The CFA also built a series of statistical models to test whether legitimate, risk-based factors might account for the premium disparities. They controlled for state-level pricing differences, environmental risk using FEMA loss data, housing density, property age, and even claim frequency and severity.
The gap shrank, but didn’t go away entirely. After every available control was applied, homeowners in Black and Hispanic neighborhoods still paid 10% and 11% more, respectively, than those in predominantly white neighborhoods with identical policies. And when environmental risk was added to the model, the gap actually widened more, indicating that white homeowners face insurable risks like wind and hail, while homeowners in Hispanic communities were more exposed to risks like flooding that standard policies don’t cover at all.
How insurance redlining undermines homeownership stability—and what can be done about it
The CFA’s researchers explain that the racial premium gap can exacerbate housing costs, contributing to “further drain the wealth of homeowners in Black and Hispanic neighborhoods and aggravate long-standing racial homeownership gaps.” Researchers also warn that its numbers are likely an underestimate and the problem is much worse.
“Since the data come from official rate filings, they do not account for all the ways in which homeowners may experience insurance discrimination, such as in their interactions with agents or in the handling of claims,” researchers said.
For hopeful homebuyers, the higher insurance premiums can make or break their ability to buy their first home. And for current homeowners, the increases can make homeownership unaffordable, forcing them to sell or become delinquent on their mortgage payments.
To combat the racial premium gap, the CFA recommends that states enforce insurance company compliance with fair housing laws and require regular company testing and disclosures.
The organization also calls for prohibiting insurers from using ZIP code or smaller geographic territories to set their premiums. Additionally, the consumer group called for home insurers to publicly disclose their transaction-level data each year, similar to how the Home Mortgage Disclosure Act (HMDA) requires public disclosures of mortgage lenders.
