Buying an electric vehicle is exciting, but paying high insurance premiums is not. Higher insurance premiums are a key reason motorists are on the fence about EVs.
Insurance providers prefer to cover products by calculating their risk profile. This requires a lot of data that EVs don’t have because they’re still new. Electric cars represent a higher risk to insurance providers.
Analyzing the Reasons for Expensive EV Premiums
Let’s explore key reasons why insurance premiums are so high for EVs.
Electric cars have enormous batteries that are extremely expensive to produce. Prices start at $10,000 to $20,000 and beyond.
This is because EV manufacturers are still wrapping their heads around the restrictive supply chains. The demand for lithium is very high, but the supply is inadequate.
This has resulted in a rat race for who can procure lithium fastest. The result is a massive price hike in lithium.
EV makers have poured billions into R&D to manage the costs. But the illusive lithium metal seems to be hard to obtain.
EV batteries are costly. A battery capable of holding 200 kWh will weigh about 2,600 lbs. This makes them dangerously heavy to manage.
Worse still is the fact that batteries will get heavier. Manufacturers are trying to pack as many cells into a battery as possible.
The average 100 kWh battery weighs in at 1300 pounds. But the Tesla Semi, currently in production, has a 600 kWh battery weighing 8,000 pounds.
The heaviest loads that powerlifters can lift start at 600 lbs in controlled environments. Average mechanics won’t be able to budge these batteries from their position.
They will likely require heavy machinery to move such loads. And that adds to their overhead costs.
Electric vehicles are a different breed of cars. There are radical differences between EVs and ICE cars.
The most obvious is that EVs run on electricity, and ICEs are powered by gasoline. This means that electric cars have an enormous learning curve associated with repairs.
Mechanics must spend hundreds of hours learning the ins and outs of EVs. Not to mention that service centers must invest over $20,000 in specialized equipment.
Tesla, for example, requires authorized service centers to train their mechanics and invest in equipment.
There are rumors of Tesla poaching experienced technicians from service centers after these investments.
All these complications and risks send prices sky-high. And electric insurance providers recognize these problems.
Another extra expense is that EV diagnosis takes exceptionally long. Mechanics have to become maze-solving experts to study EV problems.
These require additional certifications that most technicians don’t have. Those with certifications know their value and charge 2x the average hourly rate.
It doesn’t help that accessing data from EV manufacturers is very difficult for service centers. Unlike ICE makers, EV makers have not agreed on a particular standard to follow.
For example, Tesla has developed their own proprietary tools to build its EVs. Imagine having to learn the proprietary tools of every EV manufacturer.
This is unsustainable for most technicians. Because of these differences, most mechanics have to rely on aftermarket scan tools to fix problems.
All this represents an enormous risk to insurance providers.
EVs have fewer moving pieces that don’t require regular maintenance. Things such as smog checks and oil changes are not needed in EVs.
They don’t have a transmission, so there is no transmission fluid to replace. There Is no oil to change. But this doesn’t reflect in service prices.
Tacking coverage options for bodily injury, liability, and collision will increase premiums.
However, finding them is easier said than done once EV parts break down. This means that electric cars will be unusable until the parts finally arrive.
Until mechanics get a hold of the parts, the car is as good as totaled. Current supply chain snags don’t appear to be getting better soon.
So to sum up, EVs require skilled technicians, expensive parts, and complex diagnostics. All this reflects on the repair bill that insurance providers aren’t happy to cover.
A Look at the Insurance Cost of Poplar EVs
Insurance premiums for EVs lie somewhere in the range of $2,1500 to $4,800. The cheapest EV to insure is the Hyundai Kona crossover SUV.
And the most expensive car to insure is the Porsche Taycan, a luxury sports car. Note that the Porsche Taycan has the least depreciation rates due to its reliability.
The table below summarizes the estimated insurance premiums for popular electric cars.
|Make and Model||Price Per Year|
|Tesla Model Y||$3,300|
|Tesla Model 3||$3,300|
Moreover, the cost of insuring electric cars varies by the insurance provider. They are making an educated guess about how likely motorists are to file a claim.
Prices are set according to their calculations. Each insurer is treated differently. Those with poor credit are charged higher. A history of claims will also increase costs.
In general, State Farm seems to offer the cheapest insurance prices for EVs.
Their insurance policies for EVs start at $1,500 per year.
Note that we are not considering full coverage for the EV either. For perspective, the average cost of full coverage for ICE cars is $2,000/year.
High insurance premiums are typical with markets that are still evolving. Take, for example, hybrid cars. Insuring hybrid cars is cheaper because the market is more mature.
Note that gasoline-powered cars are easier to insure than hybrids. This is because hybrids share many of the same problems as EVs. They are harder to diagnose and repair.
Hybrids are also more likely to be involved in accidents. This is usually because, like EVs, hybrids are incredibly silent at high speeds.
It is difficult for nearby pedestrians and cars to detect an incoming hybrid or EV. EV makers are now required to equip their cars with safety protocols to alert pedestrians.
Features such as collision avoidance ensure that accidents are kept to a minimum. As EVs adopt more safety technology, insurance policies will get cheaper.
Insurance Providers That Cover Electric Vehicles
Another major problem with EVs is that there aren’t many providers willing to cover them. Companies are reluctant to offer insurance coverage for EVs.
Companies like Arbella, Mercury, Farmers, and State Farm offer insurance for electric cars in California. Let’s take a look at insurance companies that cover electric vehicles.
Travelers is a popular company that offers insurance for electric cars. Prices start at nearly $150 per month for basic coverage. This amounts to about $1800 for one year.
Note that insurance policies by Travelers are still on the low-end compared to the market. Travelers offers discounts to buyers by using several schemes, including:
- Not having a ticket or accident in the past three years
- Completing a driver training course
- Owning a home
- Making payments through the website or app
- Requesting for a quote before their existing policy expires
Root Insurance is a popular provider of insurance coverage for electric cars. The company offers a wide range of coverage options to motorists at competitive rates.
Root Insurance also provides discounts to qualifying motorists. They also continue to update their policies to stay competitive.
The rates are determined almost entirely by how the motorist drives their car. Responsible motorists are rewarded with cheaper rates.
What sets Root Insurance apart is that it doesn’t rely on credit scores. The prices are based on how the motorist drives the EV during the test-drive period.
Getting a quote from Root is relatively easy. Visit their website or download the mobile app. The company would require access to GPS functionality in the driver’s smartphone.
The app will use the data generated from the smartphone to measure driver behaviors. Data includes:
- Time of day when the EV is driven
- The smoothness of the ride
- Speed of the car
- Turn speed
The best part is that Root Insurance uses machine learning to determine rates. This rules out any possibility of penalties based on the driving habits of other drivers.
Root will then send a quote after monitoring the data collected during the test period. Unfortunately, many drivers fail the test because Root is unwilling to cover high-risk driving.
Qualifying for Roots is good because it will result in lower premiums. This unique approach allows Root to discard high-risk drivers from their customer base.
When shopping for electric car insurance, it is vital to consider State Farm. This is because they offer discounts on electric cars.
State Farm has a goal to improve air quality and reduce emissions. Their sustainability goals have driven them to provide lower insurance premiums to EV owners.
State Farm is also working to develop more technologies to make EV ownership more affordable.
State Farm tends to offer the lowest rates for electric cars. But this mostly depends on the make and model of the car.
For example, the Mini Cooper SE is the cheapest car they are willing to insure. Covering the Mini Cooper SE from State Insurance would cost around $1,500 per year.
The figures quoted above will be different than what drivers are actually quoted.
You would be surprised to learn that Tesla offers their own insurance policies to drivers. Prices are usually on the cheaper end of the spectrum.
The only downside is that Tesla only covers Texas, Ohio, Illinois, Arizona, and California. This is abysmally low coverage for motorists. Tesla has plans to roll out coverage throughout the country.
Tesla Insurance provides the same standard of coverage as other insurance providers. Their policies include property damage liability, collision, bodily injury, and even comprehensive insurance.
Readers are advised to buy Tesla’s Autonomous Vehicle Protection package. It includes cyber identity fraud expenses, electronic key replacement, and wall charger coverage.
More importantly, this policy also covers Autonomous Vehicle Owner Liability. Most insurance providers are not willing to cover autonomous vehicles.
The autonomous vehicle insurance market will be worth $81 billion by 2025. This represents an enormous opportunity for insurance providers.
Tesla owners can request a quote from the official website by logging into their account. New owners can also request a quote once their vehicle’s VIN is generated.
Tesla offers insurance premiums based on telematics data. It rewards lower premiums to drivers who exhibit safer driving habits.
Tesla will also look at the drivers’ overall Safety Score. If the score goes down, the premium will increase.
Tesla claims to offer 20% to 30% lower premiums than its competitors. Tesla owners are more likely to get slower insurance with Tesla Insurance.
But the premiums will depend on factors such as age and driving history.
Avoiding accidents is the best way to save on electric car insurance premiums. Try to get as many quotes from different providers as possible to compare rates.
Don’t rush the process. Finding the right insurance provider will take time, but it will save money. Another way to save money is by purchasing multiple policies from the same insurer.
If the budget allows, try to buy electric cars with more safety features. Some of the most common safety features include the following.
- Lane departure warnings
- Anti-skid technology
- Adaptive light
- GPS tracking devices
- Anti-lock brakes
- Electronic stability control
You might also be eligible for tax incentives at the state and federal levels. This mostly depends on where you live and the type of car you are driving.
Check the Energy Department’s website to see if you are eligible for tax credits.
Here are a few cars that are eligible for a tax credit:
- Audi: E-Tron
- Hyundai: Ioniq 5
- Rivian R1T
- BMW: i4
- Kia Niro EV
- Mercedes-Benz: EQA
The market for electric car insurance is growing. Insurance providers are still coming to grips with the rapid advancements in EV technology.
It will be a few years until EV makers inspire confidence in insurance providers. Until then, the premiums for EVs will likely remain higher than ICE cars.
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My name is Matthew, staying in Seattle, Washington. Electric Vehicles (Electric Cars & Electric bikes) caught my attention for the last few years and my love for electric cars and bikes is everlasting. I spend many of my weekends traveling to various places all over various cities with my electric vehicle (e-bike and electric car). Here I am sharing my expertise, experience, and invaluable information about electric cars and electric bikes. Check out more.