Electric vehicles have come a long way in recent years, but they’re still too pricey for the average driver to own. Upfront costs are high, as are repairs and spare parts costs. With most EV things being costly, many people wonder, “Is electric car insurance more expensive?”
Yes, electric car insurance is more expensive than that for a conventional vehicle because their upfront price, repairs, and spares are still costly. Insurance companies are liable to pay for those things, so they offset the cost with higher insurance premiums. As prices go down in the future, we can also hope for cheaper insurances.
This article will tell you everything you need to know about electric car insurance and how it relates to auto insurance in general.
How Does Car Insurance Work?
Firstly, we must remember that electric vehicle insurance isn't something new and unfamiliar. We're talking about auto insurance, just like any other vehicle on the road.
That means insurance providers use the same factors to determine the insurance premium for an EV or a regular combustion-engine car.
So before asking, "Why is electric car insurance so expensive?” you should ask, "How does car insurance work?".
Let’s do a quick recap.
Auto insurance is a form of financial protection. The basic idea is that you pay a premium to the insurance company so that they’ll compensate you if you ever get into a car accident.
That way, you won’t have to scramble to find the cash to pay for car repairs or new parts. Also, depending on your insurance policy, you won’t have to worry about paying for the other person’s damage if you caused the accident in the first place.
Unfortunately, you won’t get your monthly premiums back if you never get into an accident. That’s why many people mistakenly think that insurance isn’t worth paying and only do it because the law requires it.
Auto insurance is all about risk, which is why the premiums you pay aren’t necessarily the same as others. You’re charged based on how much of a risk the insurance company faces when agreeing to provide you with an insurance policy.
Simply put, the riskier you are to have as a customer, the higher premium you need to pay.
Here’s a simplified list of factors that insurers use to determine how much auto insurance premium to charge you:
- Your car: The value of your vehicle, its age, and the repair cost will all have an effect to the risk that the insurer assumes. For example, an expensive new car with lots of potentially pricey repairs will increase your premiums. The same is true for older vehicles that aren’t in good shape anymore, which are more likely to fail or sustain heavier damage.
- You: Who you are also affects your insurance premiums. For instance, if you’re a young driver with little or no driving experience, you could be considered inexperienced and risky. On the other hand, senior citizens could also be seen as risky drivers despite their many years of experience.
- Your driving history: Your driving track record is another factor. Have you been in multiple car accidents? If you have, that makes you a more significant risk, so you’ll likely have to pay more for auto insurance.
- Additional insurance features: Auto insurance policies are highly customisable. Adding extra features to your policy, like windshield damage protection, will increase your premiums.
What Are Car Insurance Groups?
As you can imagine, countless cars are on the road, each with different values, repair costs, and security features. For that reason, insurance companies simplify their work by grouping cars into other car insurance groups.
In doing so, insurance companies can quickly figure out which group your car belongs to and use that information to standardise insurance premiums as much as possible.
Cars in the first group are charged the lowest insurance premiums, and the premiums become more expensive as the groups go higher.
Is an Electric Car More Expensive to Insure?
Now that we’re on the same page about how auto insurance works, we can answer the central question of this article.
The answer is yes, electric cars are more expensive to insure.
The principles behind electric car insurance in Australia is the same as in every other country worldwide. Electric vehicles are considered a higher risk for insurance companies and therefore are charged higher premiums.
Still, let’s be clear about why that’s the case. Late-model EVs are not unsafe, and they pack plenty of safety and security features.
So, why would an auto insurance company consider them riskier?
Well, there are a few factors at play, such as:
- Electric cars are expensive: Remember that one factor affecting auto insurance costs is the insured vehicle's value. Unfortunately, electric cars are still expensive compared to conventional vehicles, making their insurance premiums higher.
- Repairs and spare parts are costly: Only trained and certified technicians can do EV repairs, and spare parts aren't as readily available as those for conventional cars. These two factors drive up repair costs that the insurance company might have to bear. Therefore, they charge higher premiums.
- Electric cars are new: Insurance is all about risk, and electric vehicles are still so new that insurance companies aren’t familiar with all the risks they pose. That uncertainty in itself is risky, and it’s reflected in insurance costs.
These and other factors make EVs riskier for auto insurance providers, and electric car insurance groups rank pretty high for them.
Are EVs Difficult to Insure?
Actually, electric vehicles are relatively easy to insure. The issue here is the price of that insurance, not the availability.
After all, environmental advocates want more people to drive EVs. Governments are encouraging their adoption, and leading car manufacturers are pushing more electric models into the market.
The cost to insure an EV remains high, but it won’t be that way forever. As more affordable EVs roll out into the market along with parts and cheaper repairs, you’ll find that insurance companies will view them as less risky to insure.
When that happens, they won’t charge as much to provide insurance coverage to your EV.
The world of electric vehicles is changing rapidly, and you’ll want to keep track of what’s happening. The Blog at CarpartAU is frequently updated with articles about electric cars and other trends in the automotive industry. So check it out often to keep ahead of what’s new in the market in Australia and worldwide!
By Ray Hasbollah