Why insurance for electric cars (like Tesla) is so expensive
With petrol prices out of control and Elon Musk’s Tesla making moves in Australia, Australians have once-again driven up their demand for electric vehicles (EVs).
While this new demand is expected to lower costs over time, at the moment EVs still daunt consumers with a hefty price-tag, limited supply, and eye-wateringly high insurance premiums.
But why is car insurance so expensive for EVs? Is there any way to lower premiums? And is it still worth it to invest in an electric car long-term?
Factors driving up electric car insurance premiums
According to a statement from the Insurance Council of Australia (ICA), there are several reasons why insurance costs for electric vehicles outweigh standard petrol or diesel ones at the moment.
In a nutshell: electric vehicles are just harder to get in the first place.
While most cars/car parts need to be imported into Australia, electric vehicles are a relatively new market with underdeveloped supply chains. This escalates upfront and repair costs, which in turn makes many common car insurance claims (such as damage repairs and hire car rentals) either more expensive or more uncertain to the provider. To compensate for EVs’ added financial risk, providers jack up premiums.
Electric Vehicle Council chief executive Behyad Jafari claims “far less” could go wrong with an EV, therefore making the likelihood of having to file a claim pretty small. However, if something does go wrong, it’s unclear how long it will take to be fixed.
“The unfamiliarity with what could go wrong with EVs means [insurance] companies are unsure. It sounds risky so they pass things higher,” explains Jafari.
As the supply chain for EV parts and models matures, prices will drop long-term. But for now, drivers may be stuck with higher premiums.
How to get cheaper car insurance for electric vehicles
Despite the bigger bill, there are ways you could lower car insurance costs for your electric vehicle.
- Opt for a higher excess. Opting for a higher excess could reduce your car insurance premiums. Just be aware that when claim time does come around, you’ll have to pay more out of pocket.
- Shop around. Comparing car insurance quotes seems like a no-brainer, but you’d be surprised at how many customers buy the first policy they read. Head over to our car insurance comparison hub to get started.
- Drive safely. If you can prove you’re a reliable driver, car insurance providers will often offer a “no claims discount” to reward your safe driving.
- Bundle your insurance coverage. Taking out multiple policies from the same provider, such as car and home insurance, could net you good savings.
- Drive less. EVs particularly suit city drivers who may only need to go limited distances. This reduces the amount of time on the road (as well as how often you need to recharge), which reduces your overall risk in the eyes of the provider. Pay-as-you-go car insurance policies often offer special discounts to drivers who only range between 1,000-15,000km per year.
If you’re looking for more inspiration on how to keep car costs down, check out our complete guide to cheap car insurance.
Is it worth it to buy an electric car?
Ultimately, the best car for an individual person will depend on their needs, budget, and circumstances. However, there are enormous cost benefits to owning an electric vehicle, let alone the benefits to the environment.
According to the Electric Vehicle Council (EVC), the average petrol car costs about $14 per 100km, while the average EV only costs $4 per 100km. That's an almost 75% difference in price!
Customers with solar panels installed in their homes could find the cost of their recharges virtually free if they charge during daylight. Complimentary recharge stations at some grocery stores also makes it fairly easy to stay on the go.
Meanwhile, the simplicity of EV engines compared to internal combustion engines (20 parts vs. over 2,000) means repairs are both far less likely to happen and far simpler to execute in practice, even if parts may take a while to get here.
Looking forward to the future, EVs present a promising alternative to petrol cars. As demand, knowledge, and infrastructure around them grows, drivers could be rewarded for their eco-friendly purchase.
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