What You Need To Know About Electric Car Insurance

Shopping for an electric vehicle can be an exciting time in your life. But while you’re dreaming about trim levels, color options and all the money you’ll save avoiding the pump, car insurance is probably the last thing on your mind.

If you’re a first-time EV buyer, you may be surprised to find that the cost to insure your new battery-powered ride is higher than your gas guzzler — sometimes by a lot.

For example, when NerdWallet analyzed 2022 Tesla car insurance rates, we found that the national average for a 2021 Tesla Model Y was $2,040 per year for full coverage insurance. That’s 25% higher than last year’s national average for a 2019 Toyota Camry.

High electric car insurance premiums can add financial stress to an already expensive purchase if you aren’t prepared. Here’s what you should know.

Buying insurance for electric vehicles is no different than for gas cars. The same coverage types apply to both. 

So then, why are electric vehicles typically more expensive to insure? It mostly comes down to costs: 

• Sticker price. EVs come with heftier price tags than their gas-powered counterparts, mainly due to the batteries that power them. While replacing a high-powered gas engine can cost up to $10,000, replacing electric car batteries can cost between $2,500 and $20,000.

• Specialized repairs. EVs require specialized repair equipment and mechanics. So if you need repairs after an accident, chances are you’ll have to take your electric car to an EV-certified location. Tesla, for example, requires owners to take their cars to a Tesla service center or Tesla-approved collision center.

Higher price tags and fewer repair shops mean steeper insurance premiums since insurers have to shell out more money to repair or replace your electric car if it gets wrecked or stolen. Your insurance company may also have to pay more for a rental car since your EV could sit in the shop longer than a gas car typically would.

This doesn’t mean electric vehicle insurance will always be pricier. On the contrary, as more EVs hit the road and production costs go down, insurance premiums will likely follow suit. But it’s hard to tell when that might happen.

Many factors in pricing an auto insurance policy are outside of your control. Still, there are a few things you can do to get a better price:

• Shop around. Auto insurance quotes vary from one company to the next. That’s why shopping around with at least three different companies is often the best way to get a lower price. For example, when NerdWallet analyzed 2022 national insurance rates for a Tesla Model Y, the average price for full coverage insurance varied greatly by company.

• Ask about discounts. Many insurers offer a menu of car insurance discounts you may qualify for — but you don’t always know until you ask. In addition, some companies offer discounts for EV drivers or simply having a new car.

• Raise your deductible. A deductible is what you pay upfront before receiving a payout from your insurer after an accident. You typically can raise or lower any deductibles on your policy. A higher deductible means lower premiums (i.e., more cash in your pocket). Just be prepared to pay more out-of-pocket if you ever need to make a claim.

• Pay by the mile. Consider pay-per-mile insurance if you genuinely don’t expect to clock many miles in your new EV. With pay-per-mile insurance, you pay a monthly base rate plus a per-mile rate. This could save you a lot of money if you’re hardly behind the wheel (maybe you work from home or rely primarily on public transit). Not all companies offer this type of insurance, and those that do might not provide it in your state. 

Because auto insurance companies currently don’t require a special policy for electric vehicles, many will be able to provide a quote for your EV.

You can contact insurance companies to get quotes or use NerdWallet’s car insurance comparison tool to help get you started. Another option is to reach out to an insurance broker or independent agent. Brokers and independent agents work with multiple insurers to track down the best policy for your needs.

If you’re a Tesla owner, you have an additional option: Tesla Insurance. It is available for new and current Tesla owners for both Teslas and non-Tesla vehicles. It uses drivers’ real-time driving behaviors and other factors to generate a new monthly premium. However, Tesla Insurance isn’t available in every state.