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Want to buy an EV but not sure why insurance premiums are higher? Want to know how much more it will cost to insure an EV compared to a conventional vehicle? Unsure of how to reduce EV insurance?
Electric cars are more expensive to insure because of the higher costs associated with EVs. The immaturity of the industry also means that spare parts and labor for repairs are higher. The average increase on insurance for an EV compared to an ICE is 15% ranging from 6-40%. However, there are a number of ways of reducing EV insurance costs including reducing mileage, leasing rather than buying a battery, and always shopping around.
EV Initial Cost
The initial cost of buying an EV makes them more expensive to replace in the case of an accident or theft. This causes EV insurance to be higher than that of an ICE. The main cause of the higher initial cost of an EV is the cost of the main battery. As an example, the cost of a Tesla Model S is in the region of $100,000 whilst the cost of a comparable ICE sedan such as a BMW 3 series is more like $40,000.
EV Parts Are Expensive
ICEs have a pedigree of nearly a century and a half. The ancillary industries which support ICE engineering have evolved over time and have become very efficient. Parts are interchangeable between manufacturers, and the cost of manufacturing parts has continually decreased due to decades of development.
This is unlike EVs which as road cars are still novel pieces of engineering. There hasn’t been enough time for ancillary industries to develop to provide third-party parts, or for manufacturers to share manufacturing processes.
As a result, EV parts are still more expensive than ICEs. In the case of an accident in an EV, the insurance company will have to pay out more than they would if paying for the parts needed to repair an ICE. As a result, insurance premiums are increased on EVs compared to ICEs.
EV parts are also expensive because of the novel materials used in them. For example, the chassis in the 2018 Model S is made from extruded aluminum instead of steel. Aluminum is very expensive to repair in the event of a crash. Most car mechanics are well-versed in working with steel, and most equipment for repairing cars is geared towards steel rather than aluminum.
Many EVs are also uni-body for the purposes of drag reduction and aesthetics. Damage to the bodywork, therefore, entails replacing a lot more of the car. If a conventional car has bodywork damage, it is only necessary to replace the bodywork section which has been damaged.
This again makes repairs of EVs expensive compared to ICEs and leads to higher insurance.
EV Battery Replacements
Any EV owner knows that replacing the battery will be something they face if they plan to keep the car for more than a few years. Replacing an EV battery is still incredibly expensive due to the materials used. The cost of replacing an EV battery can often render the car uneconomical. For example, in a Tesla Model S the cost of replacing the battery is between $13,000 and $20,000.
There is also the issue that the replacement should or can only be done through the car manufacturer, meaning it isn’t possible to shop around to look for the cheapest service.
An EV battery can be damaged even in minor accidents. A collision with another vehicle even where minimal damage is caused to the car itself can render an EV battery unsafe for further use. This is unlike ICEs where accidents need to be fairly significant before the engine is severely damaged or the car is written off.
Fewer Qualified EV Mechanics
As with parts understanding of EV repairs is much limited in comparison to ICEs. There is also close to zero probability of you being able to repair an EV yourself. The number of mechanics qualified or even able to repair a non-functioning EV is a fraction of a percent of that of ICEs.
As a function of supply and demand, calling an EV mechanic is going to cost a lot more than calling a mechanic for an ICE. This means that breakdowns are more expensive and this pushes up insurance premiums.
In most cases, any faults with an EV will involve going back to the manufacturer. This means that the car manufacturer can name their price as you don’t have the option to go elsewhere. Again, this makes repairs expensive and causes insurance companies to increase premiums on EVs compared to ICEs.
Other EV Ownership Factors
There is also the need to factor in other aspects of owning an EV into insurance premiums. For example, insurance companies often include the risk of things like portable charging cables being stolen into their policies. This again increases insurance quotes.
There is also legal liability including in insurance quotes for EVs for a member of the public tripping over your charge cables whilst the car is connected to a public charger.
However, there are other factors of owning an EV that can reduce insurance. For example, Tesla’s Sentry Mode and Drive Cam functions allow you to protect the car from theft and to record any incidents which might happen out on the road.
This should bring insurance down. Being able to record incidents on the road enables you to determine culpability in the case of accidents when the accident isn’t your fault.
How Much More Expensive Is It To Ensure An EV?
Based on financial experts’ opinion it is about 15% more expensive to insure an EV compared to a conventional car. This can range from 6-40% depending on the vehicle. However, this range of 6-40% is only based on research on EVs which have corresponding combustion vehicle equivalents.
Higher-end EVs such as Tesla tend to cost a bit more to insure. This is due both to the higher initial cost of Teslas and also the fact that repairs should only be done by Tesla. But then these are luxury vehicles.
To get an idea of EV insurance costs, recent research has shown that annual premiums range from $1,463 (for an electric Fiat 500) to $3,802 (for a Tesla Model S Plaid).
However, these are subject to variation depending on whether you pay in installments or in one go.
Is It Always More Expensive To Insure An EV?
Financial experts say that an EV is more expensive to insure compared to a conventional vehicle in 88% of cases. So, the probability of an EV costing you more to insure is very high.
But ensuring an EV does not require specialist insurance. Most car insurance companies will provide insurance for an EV albeit at a higher cost.
Are There Ways To Reduce This Cost?
There are ways of reducing the high insurance premiums associated with EVs. A simple way is to reduce the amount of mileage you do in the car. Insurance providers always ask for the expected mileage before giving you a quote.
Reducing this number will enable insurance providers to give you a more favorable quote.
If you are under 25, adding a named driver with more driving experience can help to reduce insurance costs. This is also true for ICEs. This method can also be used if you have points on your driving license or have been convicted of driving offenses.
It’s also worth pointing out that the availability of EV-specific insurance policies is increasing with EV sales. As more policies become available, the cost will inevitably come down due to competition from different suppliers. In fact, this is already happening.
Research carried out in 2021 showed that owners of small EVs in the UK such as Nissan Leafs and Renault Zoes were paying less than small ICE equivalents.
This was said to be due to more insurance companies entering the EV space, and is a direct function of more EVs being on the road in the UK. EV sales in the UK almost doubled in 2021 compared to 2020.
EV manufacturers such as Nissan and Renault also allow the option of buying an EV and leasing the battery under a separate contract. This can help to reduce insurance costs significantly, as the risk of encountering battery replacement costs is all but removed. However, you may need another insurance policy for the battery depending on the leasing contract taken out.
You can also choose to pay your insurance premium upfront in one annual payment rather than on a monthly basis. This can reduce insurance costs by 20%, and is a common way for any vehicle owner to address insurance costs.
Lastly, it is also important to shop around at the start and also at the end of each insurance policy. Going with the first quote will unlikely lead to the lowest insurance costs. Staying with the same provider when policies expire is also unlikely to give you the best EV insurance rates.