Why Electric Vehicle Insurance Costs More: Key Factors and How to Save
Feb 5, 2025
Electric vehicles (EVs) are transforming the automotive landscape by offering environmental benefits and innovative technology. However, EV owners often encounter higher insurance premiums compared to those with traditional internal combustion engine (ICE) vehicles. Several factors contribute to this disparity:
Higher Repair Costs
EV’s typically incur more expensive repairs than ICE vehicles. In the first quarter of 2024 the average EV repair claim was $6,066; nearly 30% higher than for ICE vehicles. This increase is due to the specialized components and technology in EV’s which require skilled technicians and specific parts which elevate repair expenses.
Battery-Related Risks
The high-voltage batteries in EV’s pose unique challenges. During accidents these batteries can be damaged, leading to potential fire hazards. Addressing battery-related issues demands specialized knowledge and equipment which also contributes to higher insurance costs.
Advanced Technology and Features
EV’s are equipped with advanced driver-assistance systems and other high-tech features. While these technologies enhance safety and performance, they also increase the complexity and cost of repairs when accidents occur. As a result, the presence of these systems has an impact on insurance premiums.
Market Dynamics and Underwriting Practices
The insurance industry is still adapting to the growing prevalence of EV’s. Insurers are adjusting underwriting practices to account for the unique risks associated with EV’s such as higher repair costs and potential safety concerns. This adjustment period can result in higher premiums for EV owners.
Mitigating Insurance Costs
Despite these challenges, there are strategies EV owners can employ to potentially reduce insurance premiums:
Shop Around: Comparing quotes from multiple insurers can help identify more competitive rates. Utilizing an independent agent for this research can be extremely beneficial and save time by reviewing multiple options at once.
Consider Telematics: Some insurers offer discounts for drivers who use telematics devices (i.e. “usage based insurance) that monitors driving behavior and rewards safe driving habits.
Explore Manufacturer Insurance: Certain EV manufacturers provide their own insurance products which may offer competitive rates tailored to their vehicles.
As the EV market continues to evolve and insurers gain a deeper understanding of the associated risks, it’s anticipated that insurance premiums for EV’s will become more competitive when compared to those of traditional vehicles. In the meantime, EV owners should remain proactive in exploring options to manage and potentially reduce their insurance costs.
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