The Real Costs of Electric Vehicle Insurance: What Every Buyer Needs to Know

Electric vehicles (EVs) and gas-electric hybrids are gaining popularity as more drivers embrace the environmental benefits and long-term cost savings. However, insuring these vehicles often costs more than traditional gas-powered cars, with EV insurance rates typically being the most expensive.

Factors like vehicle values and specialized and longer repair times can contribute to higher electric vehicle insurance costs, while hybrids tend to fall in the middle. Knowing what drives these costs can help you discover ways to save on insurance.

Do EVs cost more to insure?

EV insurance coverage tends to cost more than hybrids and internal combustion engine (ICE) vehicles, but rates can vary due to a variety of factors.

Hybrids, which combine gas engines with electric components, generally cost less to insure than EVs. That’s because they tend to have lower repair costs and fewer specialized requirements for repair technicians. For many, this makes them a potential middle ground for cost-conscious drivers looking to balance eco-friendliness with affordability. 

Breaking down electric car insurance costs

Electric vehicles have many benefits but insuring them may come with some challenges. Several factors contribute to the higher costs of coverage, from more expensive parts to longer repair times.

Here's a closer look at why this coverage tends to be more expensive.

1. Higher vehicle value

EVs are typically more expensive to buy than gas-powered or hybrid cars. For example, the average purchase price of an EV is about $55,500 compared to $49,700 for combustible engines. Hybrids have a slight premium compared to gas vehicles, costing up to $3,000 on average. And plug-in electric hybrids may cost upwards of $1,300 to $14,000 more than a similar gas-engine vehicle.

These higher prices may impact insurance premiums. Since some insurers base a portion of their rates on replacement costs, if an EV is totaled in an accident, the cost to replace it is typically higher than a traditional car. So that can increase the financial risk for insurers.

2. Specialized repairs

EVs have unique parts and specialized labor that can also be expensive. The most significant factor? The battery. Depending on the model, replacing an EV battery can range from $5,000 to $16,000. And since EVs are still relatively new, there isn't a large market for non-original equipment manufacturer (OEM) parts, which help make gas-powered car repairs much more affordable.

Repairs also often require technicians with advanced training and EV-specific tools. That can mean that EVs have longer repair times. Data suggests it can take up to 25% more time to book an appointment at an EV repair shop, and repairs take longer on average. Insurers may also have to cover a rental car during repair time, potentially increasing claim expenses.

The cost of repairing hybrids tends to be more comparable to gas-powered vehicles, which contributes to their lower overall insurance costs.

3. Limited historical data

Traditionally, insurers rely on years of data to assess risk and set premium rates. While gas-powered vehicles and even hybrids have been around for decades, EVs are still relatively new to the market.

So, there’s a lack of historical data. That leads insurers to be more cautious. They may set higher rates to cover potential uncertainties, such as long-term maintenance trends, battery lifespan, and risks associated with EV technology.

4. Unique risks

EVs also have some risks that insurers are still learning to account for. Advanced software systems can make EVs more vulnerable to cybersecurity threats, which can compromise both vehicle safety and data security. While these risks don't directly impact every policyholder, they do contribute to the overall cost of auto insurance for electric vehicles.

While EV insurance costs are generally higher, EV owners can save money in the long run due to lower fuel and maintenance costs. For example, EVs don't require oil changes, and components like brakes often last longer due to regenerative braking systems. These factors can help offset the upfront costs of higher premiums, making EVs more budget-friendly over time.

Tips to save on EV insurance costs

Even though car insurance for electric cars tends to be higher than gas-powered or hybrid vehicles—at least for now—the best tips for saving on insurance are the same, no matter what kind of vehicle you own. Here are a few from our article on that very topic:

• Review your policy regularly with your insurance agent so you understand what’s covered and to make sure you’re taking advantage of all the discounts you qualify for. AAA Insurance agents can review your policy with you, even if your policy is with another company. The service is free, and there is no obligation to buy.
• Compare quotes. There are several options to choose from to get auto insurance quotes. You can use an agent from an insurance company like AAA Insurance or an independent insurance broker, you can get quotes directly from a company’s website—AAA.com, for example—or you can use an online comparison tool to get quotes from several companies at once.
• Take advantage of discounts. Examples of these include discounts for vehicle security systems, paying the premium in full, bundling multiple policies with the same insurer, and being a safe driver.

Emerging trends in EV insurance

EV insurance rates are changing as more people drive these vehicles. Insurers are increasingly offering policies tailored to EV and hybrid owners and incentives for eco-friendly drivers. For instance, some providers offer discounts for vehicles with low emissions or policies that include coverage for charging equipment, such as home charging stations or public charging accidents.

Other options like pay-per-mile insurance are becoming more common and could benefit drivers using EVs primarily for short commutes. These flexible policies could help drive savings, especially for drivers with limited yearly mileage.

Finally, repair costs for EVs are expected to decrease over time as battery production scales and more repair shops can handle EVs. Industry reports show that the costs of electric vehicle parts, especially batteries, continue to fall. As these costs decline, insurance premiums for EVs may become more competitive with gas-powered vehicles.

Make the right insurance choice for your EV or hybrid

While electric and hybrid vehicles often have higher insurance premiums, understanding the factors behind these costs can help you make smarter decisions. From the higher value of EVs to their specialized repair needs, these challenges highlight the importance of comparing policies and exploring the options tailored to your needs.

The good news is the market is evolving, so insuring an EV or hybrid is becoming more accessible and affordable. Whether you're already an EV owner or just exploring your options, staying informed about insurance options and trends is the first step to securing the best coverage at the right price. With the right approach, you can protect your vehicle and budget while enjoying the benefits of greener, more efficient driving.