Why Is Electric Car Insurance So Expensive?

September 27, 2023

The market for electric vehicles has grown tremendously over the past decade, with over 6.7 million plug-in electric vehicles sold in 2021 alone — a mind-boggling 116% surge in just one year. Electric cars are safer, cheaper to run, environment-friendly, and projected to capture 10% of the market share.

But the price disadvantage is still there. The average price for an electric vehicle is about $10,000 higher than the market average, and insurance prices are higher too. As a result, you may expect to pay an extra 10% to 30% on your electric car insurance, depending on the car’s make, model, and age.

So why is electric car insurance so expensive? Let’s dig into it.

What Exactly Is an Electric Vehicle?

An electric vehicle (EV) is powered by an electric motor as opposed to combustion engines used in diesel- and gas-powered cars. Electric vehicles have lower running costs and are environmentally friendly, but they are more expensive and pose higher insurance risks.

The additional cost of buying and maintaining an EV comes from its lithium-ion batteries, which can account for more than half the price of the car. Not only is replacing a battery pack costly but there is currently a shortage of EV mechanics.

Why Do People Purchase Electric Vehicles?

  • Lower fuel costs. An electric car can save you up to $1,000 on fuel per year, in addition to being able to save on oil and filter changes, cooling system flushes, transmission servicing, and other parts and components missing in an EV.
  • Tax incentives. As a new electric vehicle owner, you can qualify for a federal tax credit of up to $7,500 depending on the state, battery size, whether the car is electric or hybrid, and other factors.
  • Easy charging. Charging an EV is as easy as charging your phone. No more waiting in lines while inhaling fumes – you can just plug your car into an electric socket at home and get it ready in 30 minutes to 12 hours, depending on the charging point’s speed and the battery’s size. With over 46,000 public EV charging stations in the United States alone, it is almost guaranteed that at least one charging station is within close reach.

On top of that, electric vehicles are much cleaner than traditional exhaust systems and provide a lower center of gravity and additional frame rigidity.

Do You Need Insurance for an Electric Car?

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From a legal perspective, there’s no difference between electric, gasoline, or diesel auto insurance. Car insurance is mandatory in all states – each with different minimum insurance requirements – except New Hampshire and Virginia. However, in both New Hampshire and Virginia, you will be responsible for any damage and bodily injuries in an at-fault accident; in Virginia, you will also be required to pay a $500 uninsured motor vehicle fee to drive.

What Is Covered by Electric Car Insurance?

Electric car policies are no different from conventional auto insurance policies, offering the same types of coverage:

  • Liability coverage:
    • Bodily injury – injuries to another person in an at-fault accident.
    • Property damage liability – damage to another person’s property in an at-fault accident.
    • Uninsured/underinsured motorist coverage – costs of your medical expenses if the at-fault driver is uninsured or underinsured.
  • Vehicle coverage:
    • Collision – repair or replacement of a car damaged or totaled in an at-fault accident.
    • Comprehensive – non-collision types of coverage, such as damage from earthquakes, floods, fires, hitting wild animals, etc.
    • Uninsured motorist property damage – damage to your vehicle and property if you are hit by an uninsured driver.
  • Other optional coverage (not an exhaustive list):
    • Medical payments – injuries sustained by you and your passengers in an accident regardless of whether you are at fault.
    • Personal injury protection – injuries sustained by you and your passengers in an accident regardless of whether you are at fault, plus lost wages and some other documented losses.
    • Gap – the difference between the current worth of a car and the amount you owe on it (in the event of an accident in which the car is totaled or badly damaged).

Is It More Expensive to Insure an Electric Vehicle?

Electric car insurance is generally more expensive due to the following factors:

  • Electric cars are more expensive. The cost of EVs is higher than gasoline- and diesel-powered cars, not the least because of the higher price of lithium-ion batteries and cutting-edge technologies used in electric cars.
  • Electric car batteries need replacement. The most expensive part of an EV, the battery pack may need replacement due to the expiry date even before it stops working or underperforms.
  • Electric car mechanics are in short supply. Electric car maintenance requires high skills and special training, leading to a shortage of EV mechanics on the market and a higher price for such services.

Altogether, these factors increase insurance risks for electric cars and push insurance companies to raise prices for electric car insurance policies. That said, the price gap is closing as EVs are pouring into the market in record numbers.

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What Determines the Price of Electric Car Insurance?

The price of electric car insurance depends on its make and model, year of manufacture, location, usage, driving history, bonuses, excess on car insurance, whether you insure a single or multiple cars, whether you are a homeowner, and other factors.

How Much Is Electric Car Insurance in the United States?

The price of electric car insurance starts at about $1,500 per year for models like Volkswagen E-Golf SE and goes up to $4,000 per year for models like Tesla Model S and Porsche Taycan.

How to Save Money on Electric Vehicle Insurance?

First of all, as an owner of an electric vehicle, you are eligible for all traditional auto insurance discounts, including multi-car discounts, safe driving discounts, defensive driving course discounts, discounts for installing anti-theft devices, and discounts for bundling auto and homeowners policies. 

Secondly, you may be eligible for a federal income tax credit of up to $7,500 depending on your state, battery size, whether your car is electric or hybrid, and other factors.

Lastly, the higher price of electric car insurance may be partially or even fully offset by lower fuel and maintenance costs.

Best Electric Car Insurance Companies in the United States

Most national and regional auto insurance companies offer electric car insurance policies, but finding discounts for EV owners may still be problematic.

Among the recommended EV insures are Allstate, State Farm, Nationwide, Liberty Mutual, Progressive, and USAA. Liberty Mutual provides exclusive discounts to hybrid and EV owners.

What about Tesla Insurance?

You can buy insurance for your Tesla car from Tesla Insurance Services, the company launched by Tesla in 2019, or any other auto insurer. Tesla Insurance claims to offer insurance rates that are up to 30% cheaper than the market average, tying your monthly premium to your driving safety score. Also, the company sells insurance for autonomous vehicles, an exclusive offer on the market.

As of June 2022, Tesla Insurance provides coverage for its Model 3, Model S, Model X, Model Y, and Roadster in five states: Texas, Ohio, Illinois, California, and Arizona. Tesla car owners can get a quote or buy insurance on their website.

Is It Expensive to Insure a Tesla?

Tesla cars are generally more expensive to insure. The average annual premium for Tesla cars is around $2,200, which is about 25% higher than the market average.

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FAQ

Can I Drive an Electric Car without Insurance?

Auto insurance (which encompasses EVs) is mandatory in all states barring New Hampshire and Virginia.
In Virginia, you have to pay $500 to drive uninsured.
In Virginia and New Hampshire, you will be held responsible for compensating for all property damage and bodily injuries in an at-fault accident.

Is Electric Car Insurance More Expensive?

You can expect electric car insurance to be 10% to 30% more expensive than insurance for gasoline- and diesel-powered cars. However, the real price of electric car insurance will depend on many factors, including the make and model of the car, driving experience, state, type and amount of coverage, the usage of the vehicle (personal or commercial), etc.

Why Is Electric Car Insurance More Expensive?

There are several reasons why electric vehicles are more expensive to insure:
Higher cost of batteries and production technologies;
Higher cost of parts and components replacement and repair;
Vulnerability to damage in accidents.

Is Hybrid Car Insurance More Expensive?

You can expect hybrid car insurance to be up to 15% more expensive than insurance for gasoline- and diesel-powered cars.

How to Find the Best Insurance for My Electric Car?

Research as many options online as you can, including the platforms that allow you to compare policies from different insurers.
Consider what type of insurance and how much of it you want to get, as well as whether you are eligible for the bonuses offered by the insurance providers you research. 
Make sure the company you’re about to buy insurance from is a reputable brand with a proven track record of insuring EVs.

Is Roadside Assistance for Electric Vehicles Covered by Insurance?

Roadside assistance, also known as emergency roadside service or towing coverage, is optional coverage for electric vehicles offered by most auto insurers. It pays for service calls (gas delivery, tire change, etc.) and tows.

Will a Charging Station for Electric Vehicles Affect My Homeowners Insurance?

Whether installing a charging station for electric vehicles on your property will affect your homeowners insurance depends on the state. Some states require homeowners to have liability coverage for charging stations, while some underwriters will also require documents to make sure the charging station is installed properly.

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Oleksandr Rohovnin is a Content Marketer at Phonexa.com and an expert contributor to CoverExplore. His passion is digital marketing, innovative technologies, tech industries, and – above all – distilling vast amounts of complex information into engrossing narratives anyone can relate to. At CoverExplore, Oleksandr stokes passion for auto insurance and the automotive industry in general in every story he curates.

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