Dealing With Insurance Shock

You are super consumer, on a budget and preparing yourself for the ultimate battleground--the new car showroom.

You have read the new car brochures, done your test drives, dug up invoice prices, scanned the Internet for info, carefully weighed the cost of each option and finally arrived at your target price.

Are you ready to face down the salesperson and make a deal?

Not quite. There is one variable you may not have figured into your economic scheme--the insurance surprise.

Everyone expects--or certainly should expect--to pay for theft and collision insurance coverage on a new automobile. (Those days of buying old clunkers and then getting only liability insurance are over once you make the leap into new car ownership.)

But what surprises many new car buyers is that seemingly benign decisions about body type, transmission and options might affect insurance costs in unexpected ways.

“There are some funny anomalies,” said Ed Henry, automotive editor of Kipplinger’s Personal Finance monthly magazine, which turns out an annual issue devoted to new car costs. “The cost of insuring a two-door car, as opposed to a four-door car, is a good example.”

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It stands to reason that two-door models, which normally carry lower sticker prices than the same models with four doors, would cost less to insure. After all, they’re worth less.

But that’s not the case.

“Actually, you can generally save money in insurance by going with the four-door,” said Jeff Spring, a spokesman for the Automobile Club of Southern California.

Number crunching, the temple at which underwriters worship, supports that determination.

“It’s all done by statistics,” Spring said. “Insurance companies pay out more in accident and theft claims involving two-door cars. So the premiums are more.”

Another example: two-wheel-drive vs. four-wheel-drive.

“You can have the exact same model small truck, but if it’s four-wheel drive, the insurance will be more,” said Phil Gross, a policy officer with the California Department of Insurance.

Insurance companies, he said, say they pay out more in claims on four-wheel-drive vehicles, and that gets passed on to the consumer.

This should not be taken as proof that two-door and four-wheel drive vehicles are not as safe. The insurance companies may have an incredible volume of numbers to prove they pay out more in claims on those models, but they can’t say exactly why this is so.

“From an insurance point of view, it doesn’t matter,” said Kim Hazelbaker, a senior vice president of the Highway Loss Data Institute, an insurance industry-sponsored group that monitors claim and policy data on 80 million vehicles nationwide.

“If you are an insurance company, you want to be able to price insurance on a car accordingly, and for that you need to know how much is paid out on one type of vehicle compared to another.

“Causation doesn’t much enter into it.”

Insurance firms do, of course, take matters such as driver age and location into consideration when writing policies. Car model choice is simply another factor that goes into the mix.

Insurance officials can make some educated guesses on why similar models cost them more or less in claim outlays.

“The two-door model of a car usually has a lower production run than the four-door, so there are fewer of them on the road,” said Spring. “That means it could be harder to get a replacement part, and more expensive.”

But there are also lifestyle issues, he said.

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“Two-door models tend to be bought by singles or young couples,” Spring said, and it is well documented that younger drivers have an accident rate higher than the norm. “Also, they might want nicer options, like a better stereo. This could make a car theft more expensive for an insurance company.”

Gross said that age is also a factor in the four-wheel-drive issue. “If a truck has four-wheel-drive, a young driver will be more likely to take it off-road, up and down sand dunes or wherever,” he said. “So the rate of bodily injury is higher.”

To find out just what your car choices might cost insurance-wise, Gross suggested that consumers contact their insurance companies before making a purchase.

But to get a notion of how your choices factor into the picture, you can visit the Highway Loss Data Institute’s site on the Internet. At https://www.carsafety.org you can access their ratings for dozens of models.

For example, using the figure of 100 as the norm, the institute rates a Chevrolet Cavalier four-door as a 78 for collision and 45 for theft, both lower than average. For a two-door, the ratings increase to 118, or a bit higher than average, for collision and 53 for theft.

“You see,” said Hazelbaker, “it’s all in the numbers.”