Do you have enough money to insure that nice EV?

The electric vehicle (EV) revolution is in full swing, with more drivers than ever making the switch from gas-powered cars to eco-friendly electric alternatives. However, one critical aspect that potential EV owners must consider is the cost of insuring these high-tech vehicles. While EVs offer numerous benefits, such as lower fuel costs and reduced carbon emissions, they often come with higher insurance premiums. This article delves into the factors driving these costs and offers tips on how to manage them.

The Cost of Insuring an Electric Vehicle

On average, insuring an electric vehicle can be more expensive than insuring a traditional gas-powered car. According to ValuePenguin, the average monthly cost to insure an EV is about $337, or $4,043 annually, which is approximately 20% higher than the cost for a gas vehicle. This increase is primarily due to the higher purchase price and repair costs associated with EVs.

MoneyGeek's analysis supports this, noting that while the gap between EV and gas vehicle insurance costs has narrowed, EVs still tend to be more expensive to insure. The average annual premium for EVs is around $1,607, compared to $1,606 for gas-powered cars. This slight difference marks a significant improvement from previous years when EV insurance costs were notably higher.

Why Are EVs More Expensive to Insure?

Several factors contribute to the higher insurance premiums for electric vehicles:

Higher Purchase Price: EVs generally have a higher sticker price than their gas-powered counterparts. For instance, the average price of a new EV was $58,940 in March 2023, compared to $48,008 for a new gas vehicle. This higher value translates to higher insurance premiums.

Costly Repairs: EVs have fewer moving parts than traditional cars, but the parts they do have are often more expensive to repair or replace. The battery, which can cost between $4,500 and $18,000 to replace, is a significant factor. Additionally, the specialized training required for EV repairs means fewer available repair shops and higher labor costs.

Limited Repair Shops: The scarcity of repair shops equipped to handle EVs can lead to longer repair times and higher costs. This is particularly true for complex repairs involving the battery or other high-tech components.

Higher Total Loss Rates: Insurers often opt for total losses rather than repairs for EVs, even for minor accidents, due to the high cost of parts and labor. This trend has led to a 30% increase in total loss claims for EVs.

How to Save on EV Insurance

Despite the higher costs, there are several strategies EV owners can use to reduce their insurance premiums:

Shop Around: Different insurers offer varying rates for EVs. State Farm, for example, offers some of the lowest rates, with an average annual premium of $1,481. Comparing quotes from multiple providers can help you find the best deal.

Look for Discounts: Many insurers offer discounts for EV owners. Geico, Nationwide, State Farm, and USAA provide discounts of up to 10% for driving an EV. Additionally, bundling your auto insurance with home or renters insurance can lead to further savings.

Increase Your Deductible: Raising your deductible can lower your premium. However, be sure you can afford the higher out-of-pocket cost in the event of a claim.

Improve Your Credit Score: In most states, insurers use credit scores to help determine rates. Improving your credit score can lead to lower premiums.

Take Advantage of Government Incentives: Some states offer tax credits or rebates for EV purchases, which can offset the higher insurance costs. For example, you might qualify for a federal tax credit of up to $7,500, depending on your state, income, and the make and model of your EV.

The Future of EV Insurance

As EVs become more common, the cost of insuring them is expected to decrease. The increased availability of parts and repair shops, along with a more extensive claim history, will likely lead to lower premiums over time. According to the National Association of Insurance Commissioners, the difference in average payments for total losses between EVs and conventional vehicles has diminished significantly, from nearly $14,000 in 2013 to $1,810 in 2019.

While insuring an electric vehicle can be more expensive than insuring a gas-powered car, there are ways to manage these costs. By shopping around, taking advantage of discounts, and improving your credit score, you can find affordable insurance for your EV. As the market continues to evolve, the cost of insuring EVs is expected to become more competitive, making the switch to electric even more appealing.