Why Is EV Insurance Higher Than a Gas Car Insurance?

EV Universe

Why Is EV Insurance Higher Than a Gas Car Insurance

An electric vehicle (EV) may save you money on commuting, but EV insurance is more expensive than cars with gasoline engines.

I hate to be the bearer of bad news, but the insurance premiums on EVs, including the more affordable models like Tesla 3, are typically higher compared to their gas counterparts.

While EV insurance may be more expensive, the recent surges in gas prices are pushing more and more people to make the switch.

In 2022 alone, EV sales grew by an impressive 54.5 percent. So, with sales increasing, you’d expect the premiums to drop. However, that hasn’t been the case yet.

I believe the insurance premiums will eventually go down as EVs dominate the market. But for now, prepare to pay a relatively hefty premium.

This article will compare car insurance gas vs. EV and explain why the latter is more expensive.

EV vs. Gas Car Insurance Premiums

If you conduct a quick search on any insurance comparison websites or marketplaces, you’ll quickly realize that an electric car costs more to insure.

According to some estimates, the insurance premium of EVs can be, on average, 15 percent higher than a comparable gas-powered car.

Teslas and other high-end EVs from car makers like Porsche and Audi cost the most to ensure, oftentimes with thousands of dollars worth of difference.

According to Value Peguin, the average EV counterpart to a gas vehicle cost 25% more annually to insure.

Similarly, when looking at hybrids the average Toyota Camry’s hybrid and plug-in hybrid trims insurance costs $1,970 per year. However, the gas trims cost $1,899. On average, the difference is a little under $100.

However, the difference between a fully electric vehicle and a comparable gas-powered vehicle can be much higher.

According to The Zebra, an insurance comparison website, a Tesla Model 3 costs $470 more to insure than the gas-powered Audi A4 2.0T.

Remember that insurance costs vary by location, provider, and other factors. So, in some states and cities, the actual cost may be way higher than the average.

Type of EV and Brand Impacts on the Insurance

I also discovered that the EV’s brand and type can impact the insurance premium significantly. Generally, fully electric cars are the most expensive to insure.

If you have a hybrid, your premium may be lower than a fully electric car like Tesla Model S or Hyundai Ioniq 6.

The brand of the car also determines the insurance premium, with some brands costing hundreds of dollars more. Typically, the luxury electric car models cost the most, which is understandable given their six-figure price tags.

Why EV Insurance Is More Expensive?

When it comes to EV vs. gas car insurance, the former easily costs more per year.

I found several factors behind this scenario, from the usual factors that impact premiums to some exclusive to EVs.

Here’s why EVs cost more to insure than gas cars:

Expensive Replacement Parts and Batteries

One of the main reasons why insurance companies charge higher premiums on EVs is because their parts are relatively more expensive to repair.

According to an analysis by CCC Intelligent Solutions, EV parts are 2.7 percent more expensive to replace than their gas counterparts.

The analysis credits EV part repairs requiring more scans and calibration as the driver of higher costs.

Insurance companies base the premium on how much it costs to replace parts historically. If a car model has had frequent repair claims, it will result in companies jacking up the premium.

Apart from parts, the batteries in EVs, which are central to their operation, are pretty expensive.

Generally, EV batteries can last over 10 years, but external factors can reduce their lifespan. Replacing them can cost upwards of $5,000.

Lack of Repair Expertise

Repairing hybrid and fully electric vehicles requires specialized training, which isn’t ubiquitous yet.

In other words, it’s hard to find mechanics and technicians who can repair and fix electric cars. And those that do typically charge a lot more than they do for gas-powered cars.

Insurance companies realize that repair shops may charge hefty for repairs, so they keep the premiums higher.

Lower EV Market Share Compared to Gas-Powered Cars

I realize that EV sales have been going through the roof for the past two years, but the reality is that there are still not enough EVs on the road in the US to make these cars dominate the market and therefore lower the repairs costs and other factors that will bring lower premiums.

Cars with internal combustion engines have existed for a long time and may not phase out for another decade.

Their ubiquity also helps keep insurance premiums down compared with EVs.

It’s safe to assume that as the share of EVs increases, the insurance premium difference between EVs and gas cars may decrease.

With more electric cars and trucks on the road, repair expertise would become more common. Repair shops may not charge as much as today, leading insurance companies to price the premiums accordingly.

Other Factors

EVs are cars at the end of the day, and the same factors that impact gas car insurance also affect electric ones.

For instance, where you live can drastically impact your car insurance premium. Factors like weather, accidents, and car thefts vary by location.

Similarly, your driving record also impacts the insurance. If you have a history of traffic violations or a DUI, your insurance will be pretty expensive whether you use a gas or electric car.

Last but not least, the type of coverage you’re going for also matters.

With EVs, you have similar tiers of insurance coverage, with some just covering the basics. The more comprehensive the plan is, the more you’ll need to pay.

Cheapest Insurance Providers for EVs

The insurance providers for EVs are typically the same that offer insurance for gas-powered cars.

So, if you’re switching from a gas car to a hybrid or fully electric car, you may be able to get insurance from the same provider.

I searched for quotes online from major insurance providers in the US and found a few more affordable.

Here are my top three picks for EV car insurance providers in the US:

• USAA: With an average yearly premium of over $1,500 for EVs, USAA is the cheapest option.
• State Farm: With an average yearly premium of just under $1,650, State Farm is the next best option.
• GEICO: With an average yearly premium of $1,770, GEICO is the second runner-up.

How to Save on EV Insurance?

Not all is bad news regarding EV insurance, as there are ways you can try to save on your premium.

Remember that your EV will save you money on fuel and maintenance. So, the higher cost of insurance should easily be covered by these savings.

A 2020 Consumer Report’s study on the ownership cost of EVs found that the total cost is lower for EVs than comparable gas-powered vehicles.

Still, if you want to pay the cheapest possible insurance premium on your hybrid or electric car, here are some tips:

Compare Plans

When it comes to hybrid vs. gas car insurance, you’d ideally want a premium for a hybrid that’s similar to gas cars.

It’s best to shop around and compare plans from different providers. You may find significant price differences even with the same provider.

So, take your time to complete your research and compare your options.

It’s never been easier to compare insurance plans, as many comparison marketplaces exist.

Make sure you’re comparing the plans with the same coverage level. You can get quotes by visiting online insurance comparison websites or by reaching out to insurance companies directly.

Look for Discounts

Some car insurance providers may offer exclusive discounts for EV owners.

Search for providers that encourage people to go sustainable and drive electric cars.

Many other discounts, such as student, loyalty, or safe driver discounts, are also available. In addition, be sure to ask about bundling discounts.

Choose the Coverage Wisely

Don’t pay for extras that you don’t need. Of course, insurance providers want you to select the highest tier and pay the highest premium.

For instance, if you don’t need rental car reimbursement, don’t add it to your plan.

Look at less expensive EV models

EV insurance costs vary depending on the make and model of the vehicle. Along with mileage, the year of the vehicle will be a factor also. You can always call your insurance and ask for a quote on a vehicle you’re currently looking at purchasing.

FAQs

Is Tesla expensive to insure?

Tesla cars have some of the most expensive premiums of all the EVs on the market.

A Tesla Model S can cost over $3,000 to insure in most US states, whereas the more affordable Model 3 can cost upwards of $1,800.

Tesla’s insurance is expensive because of its expensive repairs and lack of aftermarket parts.

How much is the average insurance of EVs in the US?

The national average premium of EVs is $2,280, according to Forbes.

EV insurance is generally more expensive than gas cars. There are also significant premium differences between different brands of EV cars.

What is the cheapest electric car to insure?

The Hyundai Kona has the cheapest insurance in the US, with most premium options under $1,500.

Similarly, the Mini Cooper SE has some of the cheapest insurance premiums, ranging from $1,400 to $1,500.

Image Credits:
Hyundai Images: Courtesy of Hyundai Motor Company
Tesla Images: Provided by Tesla, Inc.
Rivian Images: Courtesy of Rivian Automotive, Inc.
Audi Images: Courtesy of Audi AG

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