What You Need to Know About Auto Insurance for Electric Cars

Elon Musk's Tesla dominates the electric car market in the U.S. As of July 2023, Tesla accounted for 61% of all electric vehicles sold in America.

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As electric vehicles become increasingly more popular, the auto insurance market has had to respond with policies for these types of cars, and many cost more than coverage for traditional gasoline-powered cars.

How Does Car Insurance Differ for Electric Cars?

Electric cars are built different. They don't have a gasoline-powered engine and rely instead on power from several batteries. As a result, car insurance coverage is handled differently, and the primary difference is cost.

Cost

When an insurance company calculates premium rates, it takes numerous factors into account. Premiums are based on your risk of getting into an accident and what the accident might end up costing.

Electric auto insurance is likely to cost more. These types of cars have a higher price tag and different internal equipment compared to traditional vehicles. All this can mean it might cost more to repair or replace an electric car if it's involved in an accident. If a policyholder carries comprehensive and collision coverage on the vehicle, the premium is likely to be higher than it would if the vehicle wasn't electric.

While electric cars have fewer moving parts than gas-only cars, the parts involved tend to be more expensive. If any part of the battery pack is damaged, for example, this can require implementing certain safety and environmental protocols, adding more to the repair bill. Electric cars often can't be repaired at just any auto body shop. Mechanics with specialized training are often necessary, and this can make coverage more expensive.

In the future, as electric cars become more popular, parts become more readily available and the number of shops qualified to repair these vehicles increases, it's possible premium costs could go down. And as with any type of car insurance, if you have a clean driving record, you might qualify for better rates. Your costs will also depend on your age and location.

Potential Cost Savings

To save money on electric auto insurance, consider per-mile insurance, which lets you pay for insurance based on how much you drive. This might be useful if your EV isn't your primary vehicle or you don't plan on driving it that often.

Bundle discounts may also be available from some companies. These discounts combine coverage for your home or renters insurance with your auto policy. You may also be able to save money with a multi-driver discount or other savings programs — talk to your insurance agent about your options.

EV owners also may qualify for tax deduction benefits, which helps you save money in the long run. For electric vehicles purchased in 2023 or after, you might qualify for a tax credit of up to $7,500 from the IRS.

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Coverage

Coverage options for electric vehicles are generally the same as what's offered for gas-powered models — you'll find options for comprehensive, liability and collision coverage. An insurance agent can help you decide what limits of coverage make sense for you.

Tesla Insurance does offer some unique add-ons for electric car coverage for its vehicles, including wall charger coverage in case yours breaks, electronic key replacement and emergency charging services if your battery drains while you're on the road.

Insurance Companies

Major car insurance companies, such as Progressive, USAA, Geico and State Farm, offer electric car insurance plans. Tesla also partners with insurance companies to offer its own insurance in a handful of states, including Arizona, California, Colorado, Illinois, Ohio, Oregon, Texas and Virginia.

Available electric auto insurance plans vary by state and insurance company, so it's best to check directly with a carrier you're considering to find out whether it offers EV coverage and what the premium costs might be.