Today’s electric vehicle technology can give EVs a lower cost of ownership in some important ways. Even if, in many cases, they cost more upfront than their gasoline equivalents, EVs need less garage maintenance and repair.
They can qualify for up to $7,500 in tax credits under the Inflation Reduction Act. Used EVs can finally qualify for up to a $4,000 credit. Commercial EV trucks like the Tesla Semi can benefit from a game-changing tax break of up to $40,000. And with gasoline prices near an all-time high in the USA, steering clear of the pump and just plugging your vehicle in can make the commute a lot less financially painful.
One area where EVs are typically more costly to own than ICE vehicles, though, is insurance. Every spectacular multi-hour Tesla battery fire, despite being statistically extremely rare, may help keep insurance premiums elevated.
According to an Insure.com analysis, an EV costs 15.5% more to insure than a gas or diesel vehicle on average. This varies sharply by model, with some being almost as cheap as ICE and others with 25% higher premiums, or higher.
Without access to insurance companies’ internal figures, it’s difficult to know why EVs often cost more to insure. It’s highly possible insurance companies are just hedging their bets because EVs are new technology.
If that’s the case, EV insurance costs will likely normalize over time as data proves them safe. It’s also possible EVs are actually riskier and insurance costs for them will stay higher. Regardless of what the future holds, here’s what you need to know right now.
EV vs Regular Car Insurance: Side-By-Side Comparison
|Regular Car Insurance||EV Insurance|
|Average Annual Premium (Self-Financial estimate)||$1,232||$1,674|
|Average Annual Premium (Jerry estimate)||$1,788||$2,460|
|Most Expensive States for Insurance||Delaware, Georgia, Louisiana, Maryland, New York||California, Colorado, New Jersey, New York, Wisconsin|
|Most Expensive Makes to Insure||Maserati, BMW, Porsche, Audi||Tesla, Porsche, Audi|
|Cheapest Models to Insure||Subaru Outback, Honda CR-V, Toyota RAV4, Hyundai Tucson||Nissan Leaf, Hyundai Kona, Chevrolet Bolt, Ford F-150 Lightning|
EV vs Regular Car Insurance: What’s the Difference?
The main difference between regular car insurance and EV insurance is the extra risk insurance companies assign to EVs. This translates to higher premiums. According to a Self-Financial study cited by The Financial Times, regular car insurance costs somewhat more than $1,200 yearly.
By contrast, average EV insurance comes to just shy of $1,700 annually, or nearly $450 more per year. Some sources, like GetJerry.com, put the average cost even higher – $56 monthly and $672 annually.
Other than cost, many features of EV car insurance and regular car insurance are the same. Understanding why EVs cost more to insure and which companies are EV-friendly can help win savings for electric vehicle owners.
Premiums Based On Model
EVs cost more to insure than their ICE equivalents in almost all cases. We’ll look at why this is so in more detail below, but it’s also important to remember some models are more costly to insure. These are also often the EVs with the biggest sticker shock at the showroom. While the correlation isn’t exact, the most expensive EVs often seem to have the biggest insurance premiums, too.
Insurance companies offer lower premiums on small, thrifty, low-cost EVs such as the Nissan Leaf and Chevy Bolt. According to Quadrant Information Services data quoted by Forbes, the Kia Niro and the Hyundai KONA also generally cost quite a bit less than $2,000 yearly to insure. Interestingly, the Ford F-150 Lightning pickup is also one of the cheaper EVs to insure. This is despite its mid-level price point.
Insurance premiums are currently highest for high-end Teslas, Porsches, and Audi. The Audi RS e-tron GT takes the dubious first-place distinction of racking up average yearly premiums of $4,150. Insurers also charge over $4,000 annually for the Tesla Model S Plaid and the Porsche Taycan Turbo S. The rest of the over $3,000 premiums are crowded with expensive Tesla and Porsche model EVs.
EV vs Regular Car Accidents
Another significant cost increase to EV insurance is because EVs may be costlier to repair after an accident. One of the main focuses of automotive insurance, after all, is covering damage to one or both vehicles after a collision. Depending on the type of coverage, the insurance may also cover damage caused by natural disasters, theft, and so on.
Regular cars can be cheaper to repair because they have a lot of moving parts. EVs having far fewer moving parts reduces regular maintenance and may prevent most trips to the body shop. But the cost picture gets flipped in the case of an accident. As MoneyGeek highlights, citing auto data company VinPit, there are two major ways EVs are often costlier to repair.
First, EVs are packed with delicate sensors and electronics. A high-speed impact is likely to scramble and destroy these, even well away from the exact point of contact. These sensors and electronics need to be checked and likely replaced.
This specialized work requires the services of a trained, and expensive, technician, not the average wrench-turner at the local garage. The parts themselves may also be pricey, with no “generic” options.
Second, repairing parts is nearly impossible, with replacement the only option for damaged EVs. With fewer “granular” moving parts, entire systems will likely need to be removed and replaced.
A few engine parts may be replaced in an ICE car after a strike on the engine bay. But an entire electric motor will probably have to be replaced if it gets compromised in any way during a crash.
As a result, accident coverage is more expensive for EVs than for regular car insurance. The companies know EV accident damage usually costs more to fix, often a lot more, than ICE damage. They raise their premiums accordingly.
Battery Replacement and Totaling
Insurance companies often include specific battery coverage in their EV insurance. Depending on the company, charging equipment coverage may also be included. The battery is typically the single most expensive component of any EV other than the entire vehicle.
The average battery costs close to $7,500 to replace, meaning damage or defects are a huge expense. Needing to cover such a single, large item raises EV premiums versus regular vehicle premiums. Basically, no single part of an ICE vehicle is anywhere near as expensive as an EV battery.
Since batteries are often damaged in accidents, insurance companies expect a huge possible expense after any impact. In rare cases, a “thermal runaway” may happen, causing the EV to destroy itself in an intense fire.
These blazes are notoriously difficult to extinguish. Most EVs still use nickel-cobalt batteries where thermal runaway starts at 410° F. Iron-phosphate batteries with a 518° F thermal runaway threshold may eventually mitigate this risk.
Runaway battery fires are extremely rare, despite the news coverage and Internet hoopla. But EVs are still at much higher risk of being discarded as totaled after an accident. This is because battery costs are so high, and repairs are so labor-intensive and expensive.
It’s easy for a damaged EV to rack up parts and labor costs higher than the “declared value” on its insurance policy. As a result, an insurance adjuster will probably judge it as totaled. This factor also raises premiums.
EV drivers, just as much as ICE drivers, may want to consider adding breakdown cover to their policy. In the case of an EV, the breakdown cover often includes battery recharging. This can include several different services.
If the EV simply runs out of charge, the breakdown cover may pay for towing it to a recharging station. Some insurance companies even have recharging vans on call to recharge EV batteries running out of juice on the road. This type of coverage seems most common in the UK, but may eventually become widely available in America, too.
At least one American insurance provider is offering battery protection coverage as of late 2022. Automotive News reports that Assurant is offering a 200,000-mile battery protection plan. This insurance helps pay for a battery replacement if the original battery loses the ability to hold 70% charge or more. This also includes a cover for the control module and regenerative braking.
EV vs Regular Car Insurance: 6 Must-Know Facts
- EV insurance typically costs $400 to $700 more per year than regular car insurance.
- EVs cost anywhere from 10% to 40% more to insure than comparable ICE vehicles from the same company.
- Low-cost EVs are usually cheaper to insure while high-end EVs have large premiums, often over $3,000 or even $4,000 per year.
- High repair costs and a greater risk of extremely expensive damage are the main factors in expensive EV insurance.
- The costliest EVs to insure include Teslas, Porsches, and Audis.
- Personal driving history, location, and similar factors still affect EV insurance premiums, too.
EV vs Regular Car Insurance: Which One Should You Use?
EV drivers will generally have no choice but to buy EV insurance for their electric vehicle. However, understanding why this coverage is more expensive can help find a solution that minimizes the cost. Unless you’re totally “set” on getting a specific EV, checking out average premium costs for different models can lead to significant savings.
Top-end models are more likely to carry higher premiums, though this isn’t always the case. Opting for a medium trim level could give a decent cut to insurance premiums, on top of lesser monthly payments.
Not all EV insurance policies are created equal, either. Some insurance companies want to support EV adoption and offer lower rates than competitors. In some cases, buying a bit more coverage can help prevent even bigger costs, too. Battery coverage on a used EV could be useful in case the battery loses its ability to hold a full charge.
In one way, at least, regular car insurance and EV car insurance are similar. It’s worth it to shop around and find the right combination of coverage, price, and model that best suits your needs and budget. Insurance doesn’t need to be an obstacle to putting an exciting, cutting-edge EV in the garage. But it should be included as part of the bigger ownership picture when deciding to go electric.