A new Insurify reportshows that the average annual cost to insure an electric vehicle is $3,159. That’s about 42% higher than the average annual rate for a gas-powered car. For newer vehicles, the difference drops to 18%, but EV owners still pay about $501 more per year on average.
Higher insurance premiums are a major barrier for people thinking about buying an EV. But experts believe this gap won’t last forever. As more EV repair shops open, insurers collect more data, and new pricing models appear, EV insurance costs may start to drop. But for EV owners today, the rates can be startling.
Why are EVs more expensive to insure?
Electric vehicle owners don’t pay higher rates because EVs are riskier to drive. They pay more because repairs cost more when something breaks.
Parts such as battery packs, specialized sensors, cameras, and high-voltage systems can make repairs more expensive, even after minor accidents. In addition, many repair shops don’t yet have the training or tools to work on EVs, which means EV owners have fewer places to get their vehicles fixed, and labor costs go up.
“The cost to replace a battery can be more than the total cost of a used gas-powered car,” says Julia Taliesin,economic analyst and a licensed insurance agent at Insurify. “And then there’s a shortage of mechanics who know how to work on these cars, which contributes to high repair costs.”
Because of these higher repair costs, insurers charge consumers more for coverage.
This problem is even compounded for some EV models, since damage to the battery pack can lead insurers to declare the car a total loss.
“When most owners start to save on their fuel bill, they imagine that they should also be saving on insurance,” said Michael Benoit, president of Pacific United Insurance Services in San Diego. “A moderate collision can total an EV outright simply because the repair costs are so near to the car’s actual value.”
Insurers are still learning
Experts also cite insurers’ uncertainty when explaining why EV owners pay higher insurance premiums.
EVs are still relatively new, and insurers don’t have the comprehensive claims history to guide their rate-setting as they do for gas-powered cars.
“The reason is that insurers don’t have sufficient claims data on EVs and price the risk conservatively until they have evidence that it is otherwise,” Benoit said. “It is more expensive not because EVs are more dangerous to drive, but because insurers are lagging.”
But experts say that the issue should improve over time.
As more people buy EVs, insurers will have more data about repairs and losses. More repair shops are also getting certified to work on EVs, which should help lower costs and speed up repairs.
“The bright side is the divide is narrowing,” Benoit said. “Repair networks are growing, and claims databases are rapidly growing.”
What can the industry do to lower costs?
Industry experts point to several solutions that could help EV owners reduce their insurance premiums.
One straightforward way to lower costs is to expand the number of certified EV repair shops. More trained technicians would mean more competition, faster repairs, and lower labor costs.
Manufacturers can also help by designing batteries and electronic parts that are easier and cheaper to replace after an accident.
And some insurers think telematics could make a big difference.
“To permanently bring these costs down, the industry must shift from pricing insurance based on outdated demographics to dynamic data models,” said John Camenisch, vice president of decision science at Root Insurance, which uses telematics technology to track driving behavior, mileage, braking patterns, and other real-world risk indicators.
“Safe driving habits, lower mileage, and smooth braking naturally offset the hardware’s premium penalty, giving safe drivers a direct way to opt out of legacy pricing and realize savings,” Camenisch said.
Experts also advise that not all insurers see EV risk the same way.
“There’s more variation in premiums among insurers here than with petrol cars,” said Steve Case, a consultant at Insurance Hero. “I’ve seen clients lower their premiums by simply changing their providers alone and without any other changes.”
And bundling auto and home insurance still remains one of the easiest ways to save. “Placing a car with a home insurance package usually saves a significant amount of money,” said Chad Silver, founder of Michigan-based Silver Tax Group. “I recommend that my clients inquire about EV-specific discounts because very few insurers advertise them.”
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