In April, Brent Shreve and his wife Molly purchased new vehicles, spending approximately $50,000 each. Brent opted for a Tesla Model Y, while Molly chose a Volkswagen Atlas. Surprisingly, despite their similar size and price, the insurance premiums for Brent's Tesla were double those for Molly's Volkswagen. State Farm, their insurer, quoted them $78 for the Volkswagen and $140 for the Tesla, despite the couple being in their mid-30s.
It seems that being young, inexperienced, and driving an expensive car are common factors that lead to higher insurance premiums. However, the decision to go electric also appeared to have a significant impact on insurance costs, as DailyMail.com analyzed data from The Zebra, a insurance comparison site, and found that electric cars were often more expensive to insure than their gas-powered counterparts in various scenarios.
This revelation came as a shock to Shreve, a data consultant who had switched to an electric car after the COVID-19 pandemic allowed him to work from home, eliminating the need for a longer-range gas vehicle. He also upgraded his wife's car to accommodate their two children.
Shreve purchased the Tesla for $53,000 but received a $7,500 EV tax credit, while the Volkswagen Atlas with an internal combustion engine cost $46,000. After obtaining quotes from multiple providers and consulting with a local insurance broker in Fishers, Indiana, the couple found that State Farm, their previous insurer, offered the best quote.
Shreve shared his surprise, saying, "I had been reading on a lot of Tesla forums that people were getting high quotes. I assumed it would be higher, but not double."
Lynne McChristian, the director of the Office of Risk Management and Insurance Research at the University of Illinois at Urbana-Champaign, explained several reasons why insurers might charge more to cover electric cars. Firstly, insurers lack comprehensive data to assess the risks associated with electric vehicles, as they have decades of data for gas-powered vehicles but limited data for electric ones.
She also pointed out that the cost of repairing electric cars is higher due to their advanced technology and fewer components. Unlike traditional vehicles with easily replaceable parts, electric cars' intricate sensors and components make repairs more complex and expensive. In some cases, electric cars are more likely to be declared totaled in accidents because the battery can account for a significant portion of the car's value.
Despite these challenges, McChristian believes that as more electric vehicles hit the road, insurance costs may eventually decrease. Currently, data from The Zebra shows that the average annual insurance cost for a Tesla is around $3,000, significantly above the national average. Moreover, insurance for electric cars across various vehicle classes tends to be more expensive than their gas-powered counterparts with similar capabilities.
A 30-year-old unmarried man would typically allocate an average of $1,800 per annum to secure comprehensive coverage for a Chevrolet Bolt EV. Based on estimates from The Zebra, this same individual would expect to pay approximately $1,476 for insuring a Kia Soul and $1,620 for a Toyota Corolla.
A parallel pattern emerges when considering compact sedans. The insurance cost for a Tesla Model 3, standing at $2,580, tends to be about 10 percent higher than that of comparably priced BMW 3 Series vehicles and those falling within the Mercedes C-Class lineup.
In the realm of compact SUVs, Tesla once again registers as the priciest option in terms of insurance. For a 30-year-old individual, securing full coverage for a Model X would typically require an expenditure of approximately $3,432. In contrast, the same coverage would command costs of $2,568 for a Mercedes GLS and $2,160 for an Audi Q7, all of which share similar price points.
Notably, Tesla has introduced its own insurance service, presently accessible in 12 states. The company asserts that it possesses a unique understanding of its vehicles, their technology, safety features, and repair costs, thereby eliminating additional charges typically imposed by traditional insurance carriers.
However, some Tesla policyholders have voiced concerns about the use of data collected by their vehicles. Although they initially received competitively priced premiums, they report that the data derived from their driving behaviors has subsequently been used against them.
Patrice argues that this data collection has the potential to benefit all parties involved by reducing insurance costs and promoting more responsible driving practices.
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