Most people who are searching for cheap transportation on a budget automatically assume that economy cars with great gas mileage also carry the lowest auto insurance rates. Research has proven just the opposite. Small cars that have low horsepower and are affordable to repair are not the least expensive type of car to insure. The annual insurance premium for a small economy car is often a few hundred dollars more than an SUV or a mini van. A smaller sized car doesn’t necessarily mean a smaller insurance premium to match.
Smaller, Less Safer
Insurance companies determine auto insurance for economy cars using a variety of influencing factors, including the age of the driver, his driving record, and the specific type of vehicle being insured. But the insurance industry also relies heavily on statistics and past history as demonstrated by the entire class of drivers with this type of vehicle. Economy cars, while cheaper to purchase and operate for the owner, actually cause more headaches for the insurance industry because collisions and accidents involving small economy cars represent a higher percentage of claims that insurance companies must pay out, making their insurance category a much less profitable sector for the insurance industry. Also, because compact cars are smaller in size, they offer less protection for the driver and passengers in the event of an accident, resulting in more severe injuries and bigger medical payments per claim. Their small size also means that in the event of a collision, there will be considerably more damage sustained by an economy car that needs repair than the damage sustained by a larger and heavier vehicle such as a mini van, pickup truck or SUV. Insurance companies have also discovered that economy cars tend to be favored by younger and much less experienced drivers, who tend to drive faster than average and also tend to get into more accidents. More young male drivers favor the cheap transportation provided by economy cars, and this demographic group tends to have more accidents and file more claims than soccer moms who are carefully driving their children to school in mini vans. Economy car drivers in more densely populated urban areas that have consistently high traffic also tend to get hit with higher rate premiums because their risk of having an auto collision is much greater than more sparsely populated rural areas.
You can purchase a fuel efficient economy car and still manage to get affordable insurance rates if you qualify for a variety of discounts offered by insurance companies to drivers who represent less risk of filing a claim, representing a savings of as much as 40% off standard rates. These include a good driving record for the past 36 months, with no accidents or moving violations, equipping cars with safety features and anti-theft devices to reduce the risk of injury or theft, good student discounts for younger people enrolled in school and maintaining a “B” average or better, and multi-car discounts in which everyone in the family, regardless of vehicle type, has their insurance coverage from the same company.
View more auto insurance rates for other vehicle types.