What Small Car Owners Need to Know About Insurance

Americans are known for their love of big cars, but a growing number of consumers are bucking that trend. Concerns about gas prices and environmental impact have drawn drivers to popular models like the MINI Cooper and the Smart car -- despite safety concerns due to their small size.

And many new small car models have a passionate following. "The cars are fun, unique and well-built," says Brett Melancon, a volunteer at FIAT Club America. "Owning a Fiat says that I'm not afraid to express myself and that I appreciate good design."

But small cars also come with risks.

In the "small overlap front crash tests" by the Insurance Institute for Highway Safety in July, only one of the 12 small cars tested earned an overall "good" rating, and four were rated "poor" for occupant protection. (The MINI Cooper Countryman scored the only "good" rating, while the Nissan Leaf, Nissan Juke, Mazda5 and Fiat 500L received "poor" ratings.) The test replicates the experience of a car's front corner hitting a barrier, pole or another car, and the results reflected real consequences for small cars -- and their owners -- in accidents.

So how can a small car owner choose the right insurance policy?

"There aren't really any small car ... insurance coverages," says Dan Ellsworth of Adobe Insurance Brokers in Morgan Hill, California. "However, there are some optional ... coverages that a buyer or a driver may want to have or increase because of a smaller vehicle."

Small Cars Face Specific Dangers

In a crash involving a larger vehicle and a small vehicle, the smaller vehicle usually receives more damage. "It just comes down to the laws of physics," says Raul Arbelaez, vice president of the IIHS Vehicle Research Center.

Shorter hoods also mean that smaller cars have less space to absorb the force of a crash. This could result in an obstacle that causes an accident to end up in the occupant compartment and injuring or killing passengers, Arbelaez notes. There was an overall driver death rate of 38 per million registered vehicles between 2009 and 2012, according to data released by the IIHS in January. But small cars had a rate of 51 deaths per million, and mini cars had a rate of 115 deaths per million.

Smaller vehicles' poor test results depend on the type of accident -- and what they crash into. When vehicles hit other vehicles of their own size and weight, Arbelaez says, "they fare pretty well." The trouble comes when small cars are in accidents with vehicles that are midsized or larger. Then "the results went from a good rating to a poor rating," Arbelaez says.

The odds also aren't with small cars, which are outnumbered on the road by larger vehicles. "In an accident, you can't choose what you hit," Ellsworth observes.

Insurance Can Mitigate Small Car Risks

Yet there are excellent reasons to buy small cars. Midsized and larger cars are catching up to smaller cars in terms of fuel efficiency. But high gas prices have encouraged some drivers to consider hybrids or all-electric vehicles, many of which the IIHS considers small or "mini cars."

Drivers who prefer small cars can protect themselves with insurance. Ellsworth recommends that small car drivers add or increase two coverage types: uninsured/underinsured motorist coverage and medical payments.

Uninsured motorist or underinsured motorist bodily injury coverage pays for injuries to you and your passengers if you're hit by a driver without insurance or one who has inadequate liability coverage. It can come in handy for any driver, Ellsworth points out, but especially small car passengers who are more vulnerable to injury risk. In some states, it's required.

Similarly, medical payments coverage (known as MedPay) pays the medical costs you or your passengers incur after an accident, no matter who's at fault. It can cover services -- such as dental care or funeral expenses -- that aren't covered by health insurance, or step in when you exceed your health plan's limits.

And if drivers have a newer model small car, they should consider collision and comprehensive coverage. These will pay for damage to your vehicle from crashes. They can also pay for other types of damage, including theft and vandalism.

Dan Skorcz, president of SoCal MINI Maniacs, a MINI Cooper club, has owned four MINIs since buying his first in 2002 and drives his daily. "I have full liability coverage, comprehensive and collision," he says.

Some Small Cars Are Safer Than Others

Small car buyers can research the IIHS ratings before heading out to the dealer lot. Popular models such as the 2015 Ford Focus, Honda Civic and Mazda3 are all named "Top Safety Picks" by the IIHS.

Specific vehicle safety features also make a difference. Rosemary Shahan, president and founder of the nonprofit Consumers for Auto Reliability and Safety, suggests shoppers look for electronic stability control. This is now standard on many models, but older, used cars may not have it. And "the more air bags the better," she says. "You can never have too many air bags."

Arbelaez notes that "newer vehicles across the board, not just small vehicles, are much safer than they used to be." And there's more good news coming for small-car enthusiasts. "In the next five, 10, 15 years, we're going to see collision-avoidance technologies that are available on more expensive cars come down to vehicles that are more affordable," Arbelaez says. "...If you can prevent [crashes] in the vehicles that are most vulnerable, you'll get huge benefits."

Many small car drivers, like Skorcz, are already convinced. "They have a very good safety record," he says of MINIs.

Others aren't so sure. "I drive a midsized," Shahan says. "If you're going to be driving in a city, I think it's smart to have a bigger car."

Steve Nicastro is a financial writer for NerdWallet.com, where he covers topics such as investing, credit cards, mortgages and insurance. He previously was an editor at Patch.com and contributor to Seeking Alpha and GoBankingRates.com.