How does buying a hybrid car affect your insurance rate?

How much would it cost to insure this Audi E-Tron electric sports car? See more pictures of sports cars.
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For most hybrid drivers, the decision to ditch the gas guzzler for something a little more green is about lifestyle rather than economics. Operating on both electrical and traditional fuel, hybrids are able to avoid using gas for long driving periods by utilizing a battery-powered electric motor. This saves owners money at the pump, but not necessarily enough to justify the higher price tag that comes along with a Prius or Volt as compared to similar, less fuel-efficient vehicles [source: Helton].

Yet while gas is an increasingly significant cost of life on the road, it isn't the only one. Auto insurance can also set drivers back a pretty penny. Does driving a hybrid help cut costs on this end too?

Some big name auto insurers offer rate discounts for hybrid drivers. Travelers and Farmers, for example, give hybrid and alternative fuel vehicle drivers a 10 percent discount off while Geico shaves 5 percent off for eco-friendly motorists. Of course, these insurers aren't cutting rates based on some sort of high-minded altruism. Research shows that hybrid drivers pose a lower insurance risk than others because they drive fewer miles overall [source: Helton].

Nevertheless, as annual auto insurance rates range from less than $1,000 to more than $3,500, the hybrid discount could be significant. That is if it actually applied to the entire rate. The Travelers discount for hybrid vehicles doesn't count toward certain portions of coverage, such as uninsured motorist and personal injury protection ("no fault"), which are required by law in many states. Other companies also impose similar limitations [sources: Edgerton, Travelers].

The way in which a car is powered is only one of a number of factors that an insurer considers in calculating an auto insurance rate. Do hybrids offer other features that may help trim that rate? Read on to find out.

Is Auto Insurance Cheaper Overall for Hybrid Drivers?

Auto insurance protects car owners and drivers against the financial risk of accidents, theft and vandalism. Most people on the road would call it a necessity. In many states, auto insurance is also required by law.

An insurance company determines coverage rates by grouping people into categories based on the following factors such as:

  • Driving record: the less accidents, moving violations and major comprehensive claims in the insured's household, the lower the rate;
  • Type of car: the more expensive the car, the more it costs to insure because of the potential cost of repairing or replacing it. Insurers also consider safety features like air bags and anti-lock brakes;
  • Age: teenagers represent some of the highest risk customers and are charged accordingly;
  • Amount of coverage: better coverage costs more;
  • Credit history: Consumers with bad credit pay 20 to 50 percent more in insurance premiums than those with good credit [sources: AutoOwnersInsurance.org, Travelers, Palmer].

Bottom line: Although a hybrid driver can save a small percentage on certain parts of his or her insurance rate, the rate is likely inflated at the outset due to other concerns related to hybrids. Specifically, hybrid cars cost more to repair than similar traditional fuel vehicles, largely because there aren't as many aftermarket repair parts available for these relatively new cars. More expensive than their counterparts, hybrids are also more costly to replace. As a result, collision claims involving a hybrid vehicle are an average $182 more expensive than those involving gas-powered vehicles [source: The IMT Group].

Hybrids are also more likely to collide with pedestrians and bicyclists, at least one report shows, presumably because these cars feature quiet engines that others may not hear approaching [source: National Highway Traffic Safety Administration].

None of the 10 least expensive vehicles to insure are hybrids. In fact, none of these 10 vehicles are even cars; they're trucks and vans [source: Pierce].

Driving a hybrid may be environmentally sound, but when it comes to auto insurance, it probably won't save you any green.

Author's Note

I have a foolproof plan for saving money on gas and car insurance: Don't drive. I pay nothing for insurance because I don't have a car (I live in New York City). Given that this note comes along with an article on hybrids, I should also note that my plan is good for the planet. Of course, there are many people for whom a life of travel by foot, bicycle and public transportation simply will not suffice. Those individuals should consider my second piece of advice: Don't expect owning a hybrid will lessen your insurance rate. Insurance companies will dangle all kinds of fancy "discounts" for having a hybrid vehicle in front of you but in the end, it is unlikely to change the amount you pay.

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Sources

  • AutoOwnersInsurance.org. "Auto Insurance Rates." (March 10, 2012). http://www.autoownersinsurance.org/rates
  • Edgerton, Jerry. "Auto Insurance: Which Cars Cost most and Least?" Jan. 18, 2011 (March 10, 2012) http://www.cbsnews.com/8301-505145_162-40542158/auto-insurance-which-cars-cost-most-and-least
  • Helton, Cecil. "Can you get an insurance discount for driving a hybrid?" Carinsurance.org. March 30, 2011. (March 10, 2012) http://www.carinsurance.org/2011/03/can-you-get-an-insurance-discount-for-driving-a-hybrid_329
  • National Highway Traffic Safety Administration. "2011 Relative Collision Insurance Cost Information Booklet." Feb. 7, 2011. http://www.nhtsa.gov/staticfiles/administration/program_development/2011_Comparison_Insurance_Costs.pdf
  • National Highway Traffic Safety Administration. "Incidence of Pedestrian and Bicyclist Crashes by Hybrid Electric Passenger Vehicles." Sept. 2009. http://www-nrd.nhtsa.dot.gov/Pubs/811204.pdf
  • Palmer, Clark. "Cheap car insurance, the smart way." Bankrate.com. (March 10, 2012). http://money.msn.com/auto-insurance/cheap-car-insurance-the-smart-way-bankrate.aspx
  • Pierce, Emmet. "Car Insurance Comparison. The most and least expensive 2012 vehicles to insure." Insure.com (March 12, 2012). http://www.insure.com/car-insurance/car-insurance-comparison.html
  • The IMT Group. "Claim Frequency, Severity for Hybrid Vehicles." (March 10, 2012) http://www.imtins.com/learning_center/lc_090110.php
  • Travelers Indemnity Company. "Credit History and Insurance." (March 10, 2012). https://www.travelers.com/personal-insurance/auto-insurance/credit-history.aspx#1
  • Travelers Indemnity Company. "Hybrid Car Insurance Discount." (March 10, 2012). https://www.travelers.com/personal-insurance/auto-insurance/hybrid-car-insurance-coverage.aspx