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Got an electric car? Don't let insurance shock you

Insurance premiums for electric vehicles can sometimes seem high. But the cost is gradually getting closer to conventional vehicle premiums. Here we look at some of the factors at play.
EV Ins Blog

Do electric cars cost more to insure?

Historically, electric cars sometimes have cost more to insure than their conventional equivalent. Whilst electric vehicles (EVs) are often cheaper to run and maintain, insurance costs can sometimes be higher than that of petrol or diesel cars.

Why are EV insurance costs higher today?

In a report in June 2023 by Thatcham Research into the impact of electric vehicles in the repair and insurance sectors, they said that EVs are performing differently in the market, with claims already over 25% more expensive than their conventional equivalents, and that repairs are taking 14% longer to complete. The report goes on to say “Insurance premiums are anticipated to rise as risks and costs are increasingly quantified by insurers”.

Insurance for an electric car may cost more than insurance for a conventional petrol or diesel car. An EV's higher price tag and more complex, often high-tech, equipment means it may cost more to repair or replace if it's in an accident. That can mean higher rates for policyholders who pay for comprehensive cover.

But, tax incentives and long-term savings on fuel and maintenance can help offset higher insurance rates.

Some observers say the gap is closing, and in some cases, insurance for EVs is in fact becoming cheaper. Although the gap is closing, the initial cost to buy most electric and hybrid cars remains higher than similar petrol or diesel versions. Naturally, in general higher-priced cars cost more to insure simply because they also cost more to repair or replace.

Parts in bits

Electric vehicles have fewer moving parts than conventional ones, but the parts can be expensive. If the battery pack gets damaged, certain safety protocols are often necessary, adding more to the repair bill. One of the biggest reasons for the higher costs being incurred by insurers is that a high proportion of the initial cost of an EV is the battery. In a car such as the Tesla, the battery takes up much of the floor plate of the car. If the car is in an accident that damages the battery, it can be very expensive to repair and may even result in writing off the car.

The next most expensive part in cars, and not just electric versions, is the cost of the microchips that are critical in modern vehicles, controlling everything from climate control systems to satnav. Covid, Russia’s war on Ukraine, Brexit - take your pick - all have contributed to supply chain issues, pushing up both initial prices as well as repair costs.

Skills needed

There’s a lot of training going on in the repair industry and it will take a while for the repair shops to get up to speed and have enough technicians skilled at dealing with EVs. For now, there aren't enough garages and repair shops with technicians trained to fix electric vehicles. The law of supply and demand therefore means qualified facilities may charge more for repairs because of the specialised training required.

Of course, all this leads to higher costs for insurance companies in the event of a claim involving an electric or hybrid vehicle, resulting in higher rates for EV policyholders. This additional risk has nothing to do with the driver. It comes down to the technology in the car itself.

Whilst EVs are not currently the cheapest cars to insure, as they become more commonplace, and the availability of parts and qualified repair shops grows, the cost to fix them should fall, as should electric car insurance rates. Or at least reach parity with conventional vehicles.

Don’t get shocked

Short term, this all means potentially higher costs for insurance companies in the event of a claim involving an electric or hybrid vehicle, resulting in higher rates for electric vehicle policyholders.

Are there ways to reduce electric car insurance costs?

As with any car insurance policy, you'll qualify for a better rate if you have a clean driving licence. As with any vehicle insurance, your age and location also impact your car insurance premium.

There are several ways to lower the price of your car insurance, whether it’s for an EV, a hybrid or a conventional vehicle. Here are a few:

  • Obviously shop around: Get quotes from multiple insurance providers to compare prices and coverage options. Different insurers may offer varying rates based on their underwriting criteria, so it's worth exploring different options to find the most affordable
  • Increase excess: Consider raising your excess, the amount you pay out of pocket in the event of a claim. Increasing the excess can lower your premium. But, make sure you can afford the higher deductible amount if you need to make a claim
  • Bundle policies: If you have multiple insurance needs, such as home or renter's insurance, consider bundling them with the same insurance provider. Some insurers offer discounts for bundling policies, which can result in overall savings
  • Be a good driver: Maintaining a clean driving record free of accidents and traffic fines is helpful. Insurance companies often offer lower rates to drivers with a history of safe driving. Consider taking defensive driving courses to improve your skills and potentially qualify for additional discounts
  • Opt for a safe vehicle: The type of car you drive affects your insurance premium. Vehicles with high safety ratings and advanced safety features tend to have lower insurance costs. And sports cars and luxury vehicles generally have higher premiums due to their increased risk and repair costs
  • Consider usage-based insurance: Some insurance companies offer usage-based insurance programs where your premium is based on your driving habits. This involves installing a telematics ‘black-box’ device or using a mobile app to track your driving behaviour. Safe driving habits, such as maintaining lower speeds and avoiding abrupt acceleration or braking, can lead to discounted premiums
  • Look for discounts: Ask about available discounts. Common discounts include safe driver discounts, multi-policy discounts, good student discounts, low mileage discounts, and discounts for anti-theft devices or safety features in your car

Safe and secure?

A factor that can reduce insurance costs for EVs is that electric cars are generally less likely to be stolen due to things like their limited range, limited charging options, and onboard tracking technology. It has also been noted that they also have a lower centre of gravity, which makes them less likely to roll in the event of a collision. These factors can contribute to a lower insurance risk, which tends to mean lower insurance costs.

But keep an eye on reports about car thieves who are constantly jumping ahead of the technology used to secure our vehicles.

How does this affect you?

If you're considering an electric car, don't be put off by the potential insurance costs. They may be higher in some cases, the gap is closing quickly and by shopping around you may find a deal that feels reasonable. The other benefits of EVs, including lower running costs, better environmental impact, and potential government incentives, can outweigh a slightly higher insurance cost.

What next for electric car insurance?

While electric car insurance isn't necessarily cheaper at the moment, the trend is moving in that direction. As the electric car market continues to grow and mature, it's likely that insurance costs will continue to become more equivalent to insuring conventional vehicles, making electric cars an even more attractive option for everyone.

Make the most of your data

Rightly Save is our new service that can help you find the best deal for your insurance needs, not just for cars, but for all your insurances. We help you use your data held by your insurers to give you control.

Rightly Save, automatically finds all your insurance policies and presents them to you in a single place, complete with renewal dates and the type of policy. To avoid your current insurer rolling you over each year, we’ll help you turn off auto-renewals in just a few clicks and help you get your insurer ready to negotiate a better price without you having to wait in phone queues.

And we’ll set up automatic reminders so you get plenty of notice of all your insurance renewals, whether for car, home, travel, pet or any others you even have forgotten about. That way you’ll have a chance to find a better deal, whether you decide to stay with your existing provider or move on to a new one.

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