Do electric vehicles cost more to insure than gasoline cars?
“Rising gasoline prices over the past six months have caused consumers to consider going electric, especially for younger generations,” said Greg Brannon, director of automotive engineering and industry relations at AAA, in a statement. “They’re looking for ways to save money, and automakers continue to incorporate cool styling and the latest cutting-edge technology into electric vehicles, which appeals to this group.”
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Figures from Argonne National Laboratory, a multidisciplinary science and engineering research center under the Department of Energy (DOE), suggest, however, that American drivers are already making the switch.
The group’s latest data shows there were 77,687 plug-in vehicles – which include hybrid and battery-powered units – sold across the country last September, a year-on-year spike of more than 42%.
Cumulatively, American motorists purchased a total of 643,858 hybrid and electric cars in 2022 and more than 2.99 million units since 2010.
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What are the benefits of driving an electric vehicle?
The AAA survey reveals that one of the biggest barriers preventing motorists from switching to electric vehicles is cost. Being a relatively new technology, it is often assumed that electric cars are more expensive to maintain than their conventionally powered counterparts.
But while it’s true that the initial purchase price of a brand new electric vehicle is often higher, drivers of this type of vehicle can reap several long-term financial benefits. These include:
Reduced fuel costs: The biggest savings drivers realize by switching to electric cars come from charging vehicles, which cost less than fuel.
Reduced car emissions: Since electric vehicles are powered by a rechargeable battery, their operation produces zero tailpipe emissions – a major source of pollution in the United States.
Lower maintenance and upkeep costs: Electric cars typically have fewer moving parts than their gas-powered counterparts, 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 battery types up to 12 to 15 years, and with more research into course to improve the performance of the battery, the service life may extend further in the future.
Tax credit: According to the DOE, all new electric and plug-in hybrid vehicles purchased since 2010 may be eligible for a federal tax credit of up to $7,500. This is, however, subject to various parameters, including the owner’s income tax and the size of the battery.
Insurance discounts: Although not yet a mainstream offer, some car insurers, including Liberty Mutual and Travelers, offer discounts for electric cars.
Read more: What are the cheapest electric vehicles to insure?
How much does electric car insurance cost?
Electric vehicles are often more expensive to insure than their gas-powered counterparts, primarily due to higher repair and replacement costs for damaged parts. Electric car batteries, for example, can cost owners between $5,000 and $15,000 if they need to be replaced. And due to the advanced technology used in these vehicles, repairing electric cars often requires a trained professional, which can drive up premiums.
However, these are not the only factors that affect electric car insurance costs. Just like other types of vehicles, premiums for electric vehicles can also be affected by the following:
The age and driving experience of the owner
The gender of the owner
The owner’s driving history
Owner Claims History
The level of coverage
The deductible amount
In most states, the homeowner’s credit score
To find out how much insurance policies for electric cars cost compared to those for conventional fuel-powered vehicles, consumer financial advice website Forbes Advisor compiled data on the best-selling 2021 models from Quadrant Information Services. The website then compared rates based on a hypothetical female driver with a clean locker getting the following coverage:
$100,000 in bodily injury liability per person
$300,000 per accident
$100,000 liability for property damage
Uninsured Motorist Coverage
Any other coverage required in the state
Here’s how much auto insurance rates vary between an electric and gas-powered model, according to research from Forbes Advisor.
Average annual car insurance cost (electric model)
Average annual car insurance cost (petrol model)
Source: Quadrant Information Services / Forbes Advisor
Read more: What are the cheapest cars to insure in 2022?
How can motorists save on electric vehicle insurance costs?
Although electric car coverage costs more, there are several practical steps electric vehicle owners can take to reduce insurance premiums. Here are a few:
Compare auto insurance rates: Because every 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 allow motorists to compare premiums to ensure they are getting the best rates possible.
Keeping a good driving record: Maintaining a good driving record is one of the best ways for motorists to access affordable auto insurance rates. Car owners can typically get a 10% to 25% reduction in premiums for adopting safe driving practices.
Maintaining a good credit score: In most states, insurers use a person’s credit score to calculate premiums. Industry experts say this is done because there is a correlation between a driver’s credit score and the chances of filing claims.
Switch to usage-based insurance or pay-per-kilometre: Enrolling in a usage-based insurance program is beneficial for drivers who drive less than 10,000 miles each year. This is often done when the insurer installs a telematics device in the vehicle. This device, also known as a black box, tracks driving behavior, allowing motorists to access discounts based on timing, quality and duration of driving.
Increase in deductible: A higher deductible means motorists will pay lower premiums. But it also increases the amount they have to pay before their car insurance pays out in the event of an accident or theft, so it should be kept at a level the driver can afford.
Opt for the annual payment: Paying for electric car insurance in a lump sum rather than in monthly installments can result in savings, as policyholders can avoid incurring interest or finance charges.