The Truth about Car Insurance for Hybrids

Are hybrid cars really cheaper to insure?

The Truth about Car Insurance for HybridsWhether it’s to help save the environment from air-polluting gas emissions or simply to help lure customers from an environmentally/economically conscious demographic, a handful of insurers have started offering discounts to owners of hybrid vehicles. But, as with a number of other aspects of having a hybrid, this particular perk gets evened out by other costs.

In California, for instance, at least four insurers—Farmers, AAA, Geico, and Travelers—offer discounts of between 5 and 10 percent for having an electric car, according to DriveClean. Sounds great, right?

But in reality, those discounts will likely only cut back on the pain of having to pay to insure a hybrid in the first place. That’s because hybrid models typically cost more to insure than their gas-only counterparts. A 2012 comparison run by for a 2011 Highlander that included
quotes from eight companies showed that the gas-only version was cheaper to insure eight out of eight times. The savings ranged from minimal (2 percent with one company) to very significant (26 percent with another), but in the end the gas-only version cost an average of 17 percent less to insure than the hybrid.

So, while the discount is good, it may really only neutralize the extra cost of having a hybrid.

But they’re safer … right?

Getting a price break for having a hybrid car is an immediate insurance discount, but there are other, long-term discounts that are the result of trends that only surface over time. For instance, if a type of car establishes a better-than-average claims record, it’s likely to cost less to insure that type of car because it’s putting less of a dent in the coverage provider’s pocketbook.

According to a November 2011 report from the Insurance Institute for Highway Safety (IIHS), hybrids do appear to be establishing a better-than-average safety record for their occupants, at least when compared with their gas-only cousins. In the study, the data showed that the odds of being injured while riding in a hybrid were 25 percent lower than the odds of being injured while riding in gas-only versions. According to IIHS officials, this is because hybrids tend to be about 10 percent heavier, and that mass works in the favor of the occupants.

But there’s a flip side. While the IIHS found that you have better odds of walking away from a crash unscathed if you’re riding in a hybrid, it also found that hybrids “may be as much as 20 percent more likely to be involved in pedestrian crashes with injuries” compared with their twin gas models. The conventional wisdom is that this is because hybrids operating in electric-only mode are quieter and may not be noticed by pedestrians. Insurers won’t like to hear that.

So much for that advantage.

Bottom line: more expensive repairs bring more expensive insurance costs

When it comes down to it, the reason most hybrids cost more to insure is that they cost more to repair. By taking a hybrid vehicle onto their books, insurers are accepting the fact that they may have a larger payout in the event of a crash than if the car was gas-only.

One explanation why hybrids cost more to repair was put forth by Mitchell International in a summer 2010 study. In the study, the author wrote that one characteristic of hybrid owners is that they tend to go to their dealership to get repairs done rather than take it to a local shop that doesn’t specialize in repairing hybrids. That alone raises the average hybrid claim size  substantially, which could kill a little bit of the dream of saving big on car costs by getting a hybrid.

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