Do electric vehicles cost more to insure than gasoline-powered cars?

“The increase in gas prices over the last six months has pushed consumers to consider going electric, especially for younger generations,” said Greg Brannon, AAA’s automotive engineering and industry relations director, in a statement. “They are looking for ways to save, and automakers continue to incorporate cool styling and the latest cutting-edge technology into electric vehicles, which appeal to this group.”

Read more: Forget auto coverage – offer your clients ‘gas insurance’

Figures from the Argonne National Laboratory, a multidisciplinary science and engineering research center under the Department of Energy (DOE), however, suggest that US drivers are already making the switch.

The latest data from the group indicates that there were 77,687 plug-in vehicles – which include hybrid and battery-operated units – sold across the country last September, a more than 42% year-on-year spike.

Cumulatively, American motorists have purchased a total of 643,858 hybrid and electric cars in 2022 and over 2.99 million units since 2010.

Read more: Allianz addresses sustainability of auto insurance

Contents

What are the advantages of driving an electric vehicle?

AAA’s poll reveals that one of the biggest barriers preventing motorists from switching to EVs is cost. Being a relatively new technology, there is often an assumption that electric cars are more expensive to maintain than their conventionally powered counterparts.

But while it is true that the upfront purchase price of a brand-new EV is often higher, drivers of this type of vehicle can achieve several financial benefits in the long run. These include:

Lower fuel expenses: The largest savings drivers make by opting for electric cars comes from charging the vehicles, which costs less compared to having to pay for fuel.
Reduced car emissions: Because EVs are powered by a rechargeable battery, operating one does not produce any tailpipe emissions – a major source of pollution in the US.
Less costly maintenance and servicing costs: Electric cars typically have fewer moving parts than their gasoline-powered equivalents, making them less likely to break down as they age.
Longer battery life: Predictive modeling conducted by the National Renewable Energy Laboratory has shown that recent technology has extended the life of some types of batteries by up to 12 to 15 years, and with more research being done to improve battery performance, the life span can be prolonged further in the future.
Tax credit: According to the DOE, all brand new electric and plug-in hybrid vehicles that were purchased since 2010 may be eligible for a federal income tax credit of up to $7,500. This, however, is subject to various parameters, including the owner’s income tax and the size of the battery.
Insurance discounts: Although not yet a mainstream offering, some auto insurers, including Liberty Mutual and Travelers, offer discounts for electric cars.

Read more: What are the most affordable electric vehicles to insure?

How much does electric car insurance cost?

Electric vehicles are often more expensive to insure than their gasoline-powered counterparts primarily because of higher repair and replacement costs for damaged parts. Electric car batteries, for instance, can set owners back between $5,000 and $15,000 if these need to be replaced. And because of the advanced technology used in such vehicles, fixing electric cars often entails a trained professional, which can push up premiums.

However, these are not the only factors that impact insurance costs for electric cars. Just like other types of vehicles, EV premiums can also be affected by the following:

The owner’s age and driving experience
The owner’s gender
The owner’s driving history
The owner’s address
The owner’s claims history
The level of coverage
The deductible amount
In most states, the owner’s credit score

To find out how much more electric car insurance policies cost compared to those for conventional fuel-powered vehicles, the consumer financial advisory website Forbes Advisor compiled data about the top-selling 2021 models from Quadrant Information Services. The website then compared rates based on a hypothetical female driver with a clean record getting the following coverage:

$100,000 in bodily injury liability per person
$300,000 per accident
$100,000 in property damage liability
Collision coverage
Comprehensive coverage
Uninsured motorist coverage
Any other coverage required in the state
$500 deductible

Here’s how much auto insurance rates vary between an electric and a gas-powered model, according to Forbes Advisor’s research.

How can motorists save on electric vehicle insurance costs?

Although coverage for electric cars costs more, there are several practical measures that EV owners can take to slash insurance premiums. Here are some of them:

Comparing auto insurance rates: Because each driver’s profile and circumstances are different, there is no single insurer that offers the cheapest rates for everyone. This is where insurance comparison websites come in handy as these online platforms enable motorists to compare premiums to ensure they are getting the best rates possible.
Keeping a clean driving record: Maintaining a clean driving record is among the best ways motorists can access affordable car insurance rates. Car owners can typically access between 10% and 25% reduction in premiums for adopting safe driving practices.
Maintaining a good credit rating: In most states, insurers use a person’s credit score in calculating premiums. Industry experts say this is done because there is a correlation between a driver’s credit rating and the chances of filing claims.
Switching to usage-based or pay-per-mile insurance: Enrolling in a usage-based insurance program is beneficial for drivers who log fewer than 10,000 miles every year. This is often done with the insurer installing a telematics device in the vehicle. This device, also called a black box, tracks driving behavior, allowing motorists to access discounts based on when, how well, and how much they drive.
Raising the deductible: A higher deductible means motorists will pay lower premiums. But this also increases the amount they need to pay before their auto insurance picks the tab in the event of an accident or theft, so it must be kept at a level that the driver can afford.
Opting for annual payment: Paying electric car insurance as one lump sum rather than by monthly instalments can result in savings as policyholders can avoid being charged for interest or finance arrangement fees.