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Once a rare sight on roads, electric vehicles (EVs) are now commonplace due to their rising popularity in recent years. According to the International Energy Agency (IEA), electric car sales increased 35% in 2023, accounting for 18% of all sales for the year.
These sales numbers reflect the growing appeal of EVs. More consumers are turning to EVs to save on fuel costs, take advantage of government incentives and support the environment, among other benefits. Lower prices are also driving new EV sales. Kelley Blue Book reports that new EV prices in January 2024 was $55,353, substantially lower than June 2022's average price of roughly $66,000.
While EVs are becoming more affordable, they generally cost more to insure than their gas-powered counterparts. Here's what you need to know about electric car insurance and how you can save.
Is Electric Car Insurance More Expensive?
Indeed, it costs more to insure an EV—specifically, $44 more per month on average—than a gas-powered car, according to the National Association of Insurance Commissioners (NAIC). Similarly, Insurify reports that EV car insurance premiums average $357 compared to $248 for gas-powered vehicles—a 44% increase.
Generally, expensive cars like sports and luxury vehicles have higher insurance premiums than more affordable vehicles like compact cars. Along these lines, EVs typically cost more than similar gas-powered cars, which is a significant reason why their insurance is more expensive. Perhaps as the cost of EVs drops, the disparity in insurance premiums will also shrink.
Why Does Electric Car Insurance Cost More?
Several factors contribute to the higher cost of electric car insurance, such as:
- Higher price: According to January Kelley Blue Book data, the average new EV sold for $55,353, while the average new car across all categories sold for $47,401. With a higher cost of replacement, auto insurers may offset their risk with higher full-coverage insurance premiums.
- Repair costs: EVs may need less maintenance than gas-powered vehicles, but when they do need significant repairs, they are generally more expensive. EV batteries, in particular, are expensive to replace, ranging from $6,500 to $20,000. Also, fewer repair shops have the specialized equipment and knowledge to fix electric cars.
- Shortage in repair resources. EVs rising popularity is subsequently increasing the demand for replacement parts and qualified labor. Unfortunately, the availability of these resources is still lagging behind the growth.
Benefits of Electric Cars
Electric cars may be more expensive to insure, but their upsides may make them worth the investment.
- Less emissions: EVs and hybrids help you reduce your environmental impact since they emit less tailpipe emissions than gas-powered vehicles. They don't produce any tailpipe emissions when operating solely on electricity.
- Fuel savings: According to the U.S. Department of Energy, the cost of gas can greatly outweigh what you'd pay for the electricity needed to operate an EV due to the latter's higher energy efficiency.
- Lower maintenance costs: Electric motors are less mechanically complex than gas-powered engines. With an EV, you can say goodbye to regular oil changes and other routine maintenance tasks like replacing timing belts, spark plugs and transmission fluid.
- Tax credits: You may be eligible for a tax credit of up to $7,500 for purchasing a 2023 or newer electric, hybrid or fuel cell vehicle or up to $4,000 for purchasing a pre-owned vehicle. Additionally, check your state's laws and incentives to see if you're eligible for further tax incentives.
- Access to reserved lanes and parking: Many cities allow you to drive your EV in high-occupancy vehicle (HOV) lanes and park in reserved parking spots.
How to Save on Electric Car Insurance
Although EV insurance is usually more expensive, you can still lower your car insurance costs in the same ways you would with a traditional car.
Shop and Compare Insurers
The Insurance Information Institute (III) recommends getting at least three price quotes from different auto insurers, including your current one. Make sure you get quotes for similar coverage options and amounts to make sure you're making apples-to-apples comparisons. If you find a lower rate with another provider, you can make the switch to reap the savings.
Take Advantage of Discounts
Many insurance companies offer discounts to EV drivers. Contact your insurer to see if they offer an alternative fuel discount or other green discounts. You may qualify for other car insurance discounts for bundling home and auto policies, insuring more than one vehicle, taking a defensive driving course and other methods.
Raise Your Deductible
Your car insurance deductible is the amount you'd have to pay out of pocket before your coverage pays the rest on a claim. You may be able to lower your car insurance premiums by raising your deductible since you'd be taking on more of the financial risk. Just make sure not to set the deductible so high that it would strain your finances if you have to file a claim.
Consider Reducing Coverage
If you're financing your vehicle, your lender most likely requires you to carry both collision and comprehensive coverage. But if your car is paid off, and you can afford to replace it or repair it out of pocket, you might consider dropping those coverages to save money. If you have an older car worth less than a few thousand dollars, paying for repairs or replacement may make more financial sense than carrying full coverage car insurance.
Keep a Clean Driving Record
Auto insurers set rates based on several factors, including the likelihood you'll file a claim. So whether you drive a gas-powered or EV, maintaining a driving record free of accidents and traffic tickets may result in a lower risk score and, consequently, lower premiums.
Frequently Asked Questions
Yes, most auto insurance companies offer coverage for EVs. As with conventional vehicles, your coverage options and rates can vary from one provider to another, so it's essential to compare insurers to find the best balance of coverage and premiums.
Some insurers offer coverage specific to EVs, such as add-ons for wall chargers and battery replacements.
Some insurers offer discounts for driving an EV or bundling your home and electric car insurance policies. Many providers break down the discounts they offer on their websites, or you can contact your insurer directly to see if they offer EV or green vehicle discounts.
Yes, EVs typically have higher sticker prices than gas-powered ones. If you're considering buying an EV, keep in mind that tax incentives, lower fuel costs and less required maintenance may lower your cost of ownership to narrow the gap.
The Bottom Line
Electric cars offer many benefits, but lower insurance premiums aren't typically one of them. However, your insurance company may offer discounts for driving an electric or hybrid vehicle to make your policy more affordable.
Regardless of what type of car you drive, maintaining good credit could help you save on car insurance. Remember, most states allow car insurers to use a credit-based insurance score to help them set policy rates. If your credit scores are less than ideal, taking steps to improve your credit could lead to lower premiums. Get started by checking your credit report and scores for free with Experian, and addressing any items that could be dragging your score down.