Electric vehicles, popularized by automakers like Tesla, Nissan, Volkswagen, and Mitsubishi, are seeing robust demand in 2020. According to the International Energy Agency, electric vehicle sales should comprise 3% of all global auto sales by the end of 2020 as the traditional passenger vehicle market will contract by 15% over the same time period.
Car owners are willing to fork over more cash for electric cars — but does a higher price tag lead to higher car insurance costs? Here's everything to know about insuring an electric car, and how to get cheaper rates.
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Are electric vehicles more expensive to insure?
While drivers seem to be taking to plug-in vehicles in record numbers, there are some financial outages linked to electric vehicles, with car insurance costs at the top of the list.
According to a new report from Self Financial, insurance costs linked to electric vehicles (EVs) fare poorly when measured against gasoline-fueled vehicles. This from the study:
- Electric vehicles are on average $442 more expensive to insure than their gas equivalents
- The average annual insurance cost for a gas car is $1,232, compared to $1,674 per year for their greener counterparts
- The running cost of a gas car in the U.S. is on average $3,356 per year, while electric vehicles cost just $2,722
- When purchase price was factored into the calculation, Self Financial discovered that, on average, gas cars are $1,454 cheaper per year, costing an average of $7,952, compared to electric cars at $9,406.
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“As electric vehicles become more popular, people will be looking into whether they’re worth it,” said Lauren Bringle, an accredited financial counselor at Self Financial. “Our data suggest that worth is real in terms of running costs, but it’s typically going to be more expensive in the first instance when buying the vehicle.”
Why do electric cars cost more to insure?
The data suggest that the heavier insurance costs on electric vehicles may be short-lived, as the primary impactors should smooth out over time.
“To date, electric cars are more expensive to insure than fossil fuel-based vehicles,” said David Harlow, managing director at pH Innovate, an insurance technology firm based in Pontypool, Wales. “The main reason for this is EV parts are difficult to obtain.”
Additionally, repairs on electric vehicles cost a lot more than fossil-fuel-based vehicles. “That’s primarily due to the availability of vehicle parts from manufacturers,” Harlow said. “As a result, insurers perceive electric vehicle owners as a higher risk on the road than fossil-fuel-based vehicle owners.”
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How to reduce the cost of your insurance for electric cars
How else can electric car owners cut a better, more value-oriented deal on auto insurance? Insurance experts have a few helpful ideas on that front:
- Focus on electric car-based insurance that rewards "green driving"
- Shop around for insurance rates and get insurance quotes
- Work with your existing car insurance provider
- Factor in insurance to your total electric car costs
1. Focus on electric car-based insurance that rewards "green driving"
To support and reward the electrification of transportation, several insurance companies have developed discounts and policies designed specifically for electric vehicle drivers.
“The exact savings will depend on the insurance company, but there are existing premium reductions to target,” said Emie-Claude Lamoureux, manager of communications and engagement at ChargeHub by Mogile Technologies Inc.
Lamoureux recommended focusing on the following key EV insurance areas:
- Green vehicle rebates/incentives
- Alternative fuel vehicle rebates/incentives
- Fuel-efficient discounts
“Keep in mind there are many more incentives with EV insurance deals that might use different policy brand names,” Lamoureux added.
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2. Shop around for insurance rates and get insurance quotes
There isn't a single auto insurance company that offers the cheapest electric car insurance to all its customers. “Your EV auto insurance rate depends on your driving profile and the region in which you register your vehicle,” Lamoureux noted.
Other insurance experts agree.
“There are many factors in getting the best price for car insurance,” said Lauren Fix, founder of The Car Coach Report, a consumer auto advisory platform based in New York City. “That includes your credit rating, driving history, cost of replacement vehicle, the location where you live, and mileage driven. Therefore, it’s best to shop around at least four different locations to see who can offer you the best deal. If you have homeowners insurance, start with that company.”
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3. Work with your existing car insurance provider
Contact the company that covers your homeowner's insurance or renters insurance first. “Your primary insurance company will likely give you the best rate,” Fix said. “If they can’t help out, then start shopping around online, where there are plenty of places to find a good deal.”
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4. Factor in insurance to your total electric car costs
Lastly, don’t forget about the price budgeting for a new electric vehicle purchase.
“When calculating the total cost of ownership it’s important to not just add in your monthly payment, but also the cost of insurance and any maintenance over a period of time,” Fix said.
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