Small cars: Big in safety, bigger in car insurance costs?

Rachel Hartman

If sky-high gas prices are making you (and your wallet) cringe, it may be time to jump on the bandwagon of small fuel-efficient cars. But while you may be paying less at the pump if you buy a small car, you may be paying more for car insurance.

Sales of subcompact and compact passenger cars accounted for about one-fourth of all retail car sales during the first two months of 2012, according to a J.D. Power and Associates report released in April 2012. Of those, subcompact vehicle purchases have increased the most, up more than 35 percent in January and February 2012 compared with the period a year earlier.

Saving money at the pump, coupled with more credit options available for consumers buying a new car, are two of the driving forces behind the rise in small car sales.

“Improved access to credit is allowing buyers with lower credit scores to return to the new-vehicle market,” says Thomas King, director of J.D. Power and Associates' Power Information Network. “These buyers tend to purchase less-expensive vehicles, which also tend to be smaller vehicles.”

Small cars and car insurance

While the price tag on a small vehicle tends to be lower than that of a larger vehicle, other driving-related expenses – such as car insurance premiums – may cost more for a small car.

Insurance companies take into account the potential costs -- such as crash repairs and injury treatment -- for various vehicle models when setting auto premiums. This data, known as loss information, affects all types of car insurance coverage, including liability, collision, comprehensive and personal injury protection (PIP).

“Small cars in general have higher losses than larger cars, which – all other things being equal – means higher premiums,” says Kim Hazelbaker, senior vice president of the nonprofit Highway Loss Data Institute.

Based on a comparison of losses under optional collision coverage for various types of 2008 to 2010 models, the Highway Loss Data Institute found that small two-door cars had a relative claim frequency of 127, compared with just 81 for very large four-door cars. Part of the reason for higher losses among smaller vehicles coincides with longer time on the road.

“These vehicles tend to be driven more miles because they get better gas mileage,” Hazelbaker says. “If consumers have a long commute, they may lean toward using a fuel-efficient vehicle, and then are more exposed to risks on the road.”

In the event of a crash, small, light vehicles generally offer less protection than larger, heavier ones, according to the nonprofit Insurance Institute for Highway Safety. A report published in June 2011 by the institute listed the number of driver deaths per million registered vehicles for small and large vehicles. For four-door minicars, the report noted a driver death rate of 82, compared with 46 for very large four-door vehicles. SUVs had a driver death rate of just 28; minivans fared even better, with a rate of 25.

Choosing a safe small car

Even though larger is typically equated with safer when it comes to vehicles, many safety features are available for small cars. In addition to offering more protection on the road, some of these safety features can lead to discounts on car insurance premiums.

Here are three factors to consider when shopping for a small car:

1. Know which vehicles are tops in safety.

Each year, the Insurance Institute for Highway Safety rates cars based on how well they hold up in crash tests. The evaluation includes high-speed front and side crash tests, a rollover test, and evaluations of seat and head restraints in rear-end collisions.

The institute then lists top safety picks for several categories of vehicles. For 2012, top safety picks for minicars include the Fiat 500 (built after July 2011), Ford Fiesta, Honda Fit, Nissan Versa sedan and four-door Toyota Yaris hatchback.

For small cars, the Chevrolet Cruze, Chevrolet Sonic and Chevrolet Volt topped the list, followed by the four-door Ford Focus and four-door Honda Civic.

2. Check for electronic stability control.

In recent years, electronic stability control (ESC) has produced vast improvements in auto safety. The feature can lower the risk of a fatal rollover crash by as much as 80 percent, according to the Insurance Institute for Highway Safety. Insurance losses under collision coverage are about 15 percent lower for vehicles with ESC than for models without it, according to the Highway Loss Data Institute. Starting in 2012, car manufacturers were required to install ESC in all new models.

If you buy a vehicle with this equipment, be sure to notify your auto insurer.

“Most companies have some sort of discount in place for vehicles with electronic stability control,” Hazelbaker says.

Amica Mutual, for instance, offers a discount on vehicles equipped with a factory-installed, four-wheel ESC system. Farmers Insurance also offers discounts for drivers who drive cars with electronic stability control.

3. Ask about additional safety features.

“The more air bags, the better, in a small car,” says LeeAnn Shattuck, co-owner of Women’s Automotive Solutions, a car-buying service in North Carolina.

Check for driver and passenger front, side, and curtain air bags. Also ask about automatic safety belts, anti-lock brakes, and navigation systems such as the GM OnStar.

When it comes time to sign up for car insurance, mention these safety features if your car has them. Some insurers will offer discounts on premiums based on the extra protection you – and your vehicle – are getting on the road.

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