Why Insurance Costs are Rising for EVs

By Ursula Nizalowski

 

Though electric vehicles (EVs) are more common now than they have been in the past ten years,
they are still arguably more expensive to purchase than regular gas-powered cars. On top of that,
insurance costs for EVs are higher as they are $44 more than gas-powered vehicles on average
according to the National Association of Insurance Commissioners ( NAIC ). Now this might
change as more people buy EVs, which will reduce the price of the vehicle’s specialized parts
since they would become more commonplace and thus bring down repair and insurance costs.
But until that happens, EV drivers have to put up with the higher prices of purchasing and
insuring EVs because not enough people are buying them now to reduce the prices-in-question.
And so let’s break down why EV insurance costs are increasing and what EV drivers can do to
save money on their car’s insurance.

Causes

Expensive Parts – One of the primary reasons EVs are more expensive than regular
gas-powered cars is because of the parts inside. Though in particular the batteries needed to
power the vehicle as they are “made from minerals such as lithium, cobalt, and nickel, which are
in high demand and sometimes limited” in supply says Progressive. So because the materials to
make the battery are hard to come by, that increases their price and thus makes it hard to replace
the batteries if they malfunction or break down, making the insurance on them higher. And this
has gotten worse in recent years following the COVID-19 Pandemic as it caused supply
shortages for every industry including EV manufacturing that are still happening to this day.

Lack of Specialized Repair Shops – Besides parts, EV repair shops are also
limited. That’s because “The specialized training required to repair electric vehicles means fewer available options and higher charges for customers when repair needs arise” MarketWatch
states. In other words, one can’t just go to any repair shop to fix an EV since they have unique
parts and can only be repaired by technicians with specific training. Naturally, the scarcity of
these things drives up the price of repair costs which increases the insurance of the EV in turn.

Ways to Save on EV Insurance Costs

Insurer Discounts – Like gas-powered cars, there are possible insurance discounts for
EVs. For instance, CNBC claims “Geico, Nationwide, State Farm and USAA all offer a
discount of up to 10% for driving an EV.” Though getting a discount depends on if the driver has
a clean driving record and good credit, which isn’t different from getting discounts for gas-
powered cars.

State Incentives & Rebates – Another way to save money on EV insurance is to
take advantage of incentives and rebates offered by states that are supportive of alternative fuel-
based cars. In Colorado, for example, residents that use EVs can possibly get “$8,000 in
rebates” and low-income California residents could qualify for “$30,000 in federal- and state-
issued rebates and incentives toward the purchase of a new EV” according to the Kelley Blue
Book . So that means EV drivers could get partial refunds or payments to purchase EVs and not
have to pay as much for the insurance as long as they are residents of these states.

Federal Tax Credits – On August 16th, 2022, US Congress passed the Inflation
Reduction Act which changed a few tax laws and credits. Among these changes included a tax credit of $7,500 that could be offered to EV drivers with certain qualifications such as seven
kilowatt hours of battery life in their vehicle. The EV’s manufacturer must also be legally
approved by the IRS with some examples listed on their website .

For more information on EV insurance, feel free to contact attorney Rick Wagner.