Insurance On Electric Cars: What Buyers And Owners Need To Know
There’s perhaps no better time to buy an electric car as the widespread popularity of electric vehicles (EVs) and hybrid-powered cars are becoming more mainstream on the back of increasing automobile competition.
All this competition has meant that soon-to-be buyers and those in the market for a cleaner and more sustainable vehicle have more options to choose from than ever before. With more competitors throwing their hats into the ring, prices for smaller EVs have steadily declined over the last few years, making high-end electric cars accessible to a bigger buyer market.
The days of the gas-powered car are steadily seeing its demise against the backdrop of increasing government tax credits and sustainable legislation support for the growing EV market.
While there are several upsides to purchasing an electric car, new owners are often surprised by the higher cost of insuring their electric car compared to a model with similar features and specifications.
When taking out auto insurance on an electric car, there are several factors new owners will need to consider beforehand, and in the following article, we’re going to give you a snapshot of the basics you need to know if you’re thinking of buying a new electric or hybrid vehicle.
What makes electric car insurance expensive?
When buying a new electric or hybrid car, there is often no difference from regular gas-powered cars when taking out insurance coverage. This may come as a surprise seeing that auto insurance for EVs tend to be slightly higher than regular car coverage.
In the United States, the national average for annual car insurance costs around $2,014 for full coverage, and $622 for minimum coverage according to data by Bankrate. Keep in mind that insurance costs can vary depending on the area where you live, your driving record, your age, and the type of car you own.
Factors that make EV insurance more expensive:
The price of the vehicle: Typically electric and hybrid cars are slightly more expensive than their gas-powered counterparts. This is mainly due to the electric components such as lithium batteries and other advanced software and hardware.
Specialized parts and repair: Another factor that can increase the cost of EV insurance is the hefty number of specialized parts and repairs required on electric cars. While the number of EVs on our roads is growing, not all mechanics may have the skill or components to repair an EV in case of breakdown or accident.
Generally, it’s understandable that higher-priced vehicles may cost more to insure seeing that their repair costs may be more expensive. The same goes for electric and hybrid cars that carry a lot of specialized technology, such as their battery pack, that can cost insurers more to cover and repair in case of damage or collision.
The additional risk of insuring any type of EV model typically has nothing to do with the person driving the car, but more so with the cost factors involved in repairing and fixing a high-end electric car.
What all this means for policyholders, is that insurance companies will drive up costs for coverage in the event of a claim involving an EV or hybrid vehicle, meaning that policyholders will end up having to pay more for the same type of insurance coverage compared to gas-powered cars.
Something to remember is that it’s important to review your policies, this includes car, home, life and health insurance. Keeping policies up to date will ensure you know what you are paying for, and in case of any lifestyle changes, you may need to inform your provider about these changes.
What is the average price for electric car insurance?
Several factors can influence the monthly cost of your vehicle insurance, such as the type of car, your age, where you live, what the car will be used for, how often you make use of the vehicle, or even where it is parked during the day or at night.
These factors are also taken into consideration when insurance companies quote you for an electric or hybrid car, but as mentioned previously, other factors such as high-end technology, specialized mechanics, and parts can increase the liability for the insurance company, which in turn leads to higher monthly premiums.
The national average for car insurance for gas-powered vehicles ranges from $2,014 for full coverage to $622 for basic coverage. In some states, insurance prices are well below the national average, such as Maine (-44%), Ohio (-41%), Vermont (-39%), Idaho (-38%), and Virginia (-34%).
On the contrary, however, insurance costs for electric and hybrid vehicles can range from between $2,152 to $4,725 for the more high-end luxury EVs and hybrid cars according to recent industry data by ValuePenguin.
The same data suggests that the Hyundai Kona crossover SUV is the most affordable to insure, with insurance coverage starting at $2,152, while the Porsche Taycan, an electric sports car, is the most expensive at $4,725.
Even more popular and widely available Tesla models, including the Model Y and Model 3, are both above the $3,012 average, costing $3,215 and $3,278, respectively.
On average, American motorists spend roughly 2.93% of their income on auto insurance according to recent data. At the state level, car insurance costs have gone up significantly in recent years, following the pandemic, stubbornly high inflation, and an increase in natural disasters, which have led to an increasing number of annual claims.
Which auto insurance providers have the cheapest EV insurance?
There are several different options to choose from when taking out car insurance for your new EV or hybrid-powered car.
Industry data figures estimate that the following six companies are the most affordable options for drivers with electric cars.
- State Farm: $1,434
- Tesla Insurance: $1,899
- Geico: $2,858
- USAA: $2,868
- Progressive: $4,444
- Allstate: $4,567
Insurance premiums from these providers may vary depending on which state you live in, how much the car is being used, and your driving record.
Another consideration to think about is the annual increase in insurance costs. Some companies may keep their premiums low by having lower deductibles or increase the cost of insurance premiums based on model features, technology upgrades, the overall condition of the battery pack, and the total cost of replacing a damaged battery pack.
Replacing a battery pack in an EV can cost anywhere between $9,180-$11,475, with the lowest cost ranging between $3,000 and $4,500 for a Nissan Leaf and the highest being about $47,000 for an F-150 Lighting.
The cost of replacing an engine in a gas-powered car can be anywhere between $2,500 to $4,000, or even up to $10,000, and will largely vary depending on the engine specifications, parts availability, and labor costs according to the National Automobile Dealers Association (NADA).
Though electric vehicles have been designed and manufactured to last, these are some of the things you need to think about before buying an EV or hybrid-powered car. While electric cars do provide a clean and efficient solution for the automobile industry, consumers are typically the ones having to pay the higher price to maintain and care for these vehicles.
How can you save money when taking out electric vehicle insurance?
Although pricing factors that determine the amount you will pay on your monthly premium for your insurance coverage are generally outside of your control, there are still a few things you could do to potentially get a lower insurance price for your EV.
Compare different options
Before taking out insurance with your current auto insurance provider, see whether getting a more affordable quote from a different provider is possible. Take some time to shop around, and get a few quotes from at least three to five different insurance companies.
There may be instances where insurance costs tend to be similar, only varying by a few dollars here and there, so to get the best possible price, make the effort to compare the options you have available.
Ask about special discounts and prices
Insurance providers may sometimes offer special discount prices to new car owners. Several options might be available for older drivers that might not be using their new electric car as much as younger car owners.
Some companies may provide special discount rates to veterans, and retirees, or even have products that cater to families, which can slightly help to drive down costs.
Consider alternatives possibilities
Another alternative you can ask insurance companies is to pay-per-mile, which allows you to pay a lower monthly base rate, plus a per-mile rate. Not all insurance providers may have this option available, and it requires drivers to log all the miles they have driven during the month.
Luckily, electronic devices can be plugged into a car, automatically tracking the distances you have covered. This can then be made available to your insurance provider, which will then quote you on the total number of miles driven.
Increase your insurance deductible
Auto insurance providers may allow you to increase or lower your deductible, the amount you need to pay upfront before receiving a payout from your insurance provider after a claim has been made.
Raising your deductible can mean you end up paying lower monthly premiums, but the downside is that if you claim, you will need to pay more out-of-pocket.
Take advantage of tax deductibles
Several improved state and federal programs can offer EV owners rebates or tax credits.
The most well-known is the Inflation Reduction Act (IRA), which is a federal program that can offer tax credits of up to $7,500 to EV owners that purchase specific electric car models and SUVs.
Another example is the California Clean Vehicle Rebate Project, which can pay up to $4,000 in rebates to California residents that purchase or own an eligible electric or battery electric vehicle.
Find out if your state has any tax deductible or rebate programs for electric vehicles. You can also read up on whether the electric car you’re looking to buy qualifies for any other federal tax programs.
Final considerations
Buying an electric vehicle comes with the benefit of reducing your carbon emissions footprint, becoming more energy independent, and lowering the possible need for fossil fuels in the long term.
Unfortunately, keeping your electric vehicle or even hybrid-powered vehicle insured can be more expensive on a month-to-month basis, considering that EV premiums tend to be higher than regular gas-powered vehicle options.
Due to the higher number of advanced technology required to maintain and operate an electric car, including the somewhat limited number of skilled mechanic professionals that have the knowledge to work on these cars, one will need to consider whether it’s cheaper to purchase or own an EV in the near term.
Auto insurance premiums of EVs, however can come down in the following years, as more mainstream commercial adoption of these vehicles could help increase the need for affordable insurance coverage.
While this may still be some time in the future, before making an electric transition, you must consider what additional costs you may end up having to pay for your newly purchased electric car.
The post Insurance On Electric Cars: What Buyers And Owners Need To Know appeared first on Due.
https://www.entrepreneur.com/finance/insurance-on-electric-cars-what-buyers-and-owners-need-to/454310