What you need to know about insuring hybrid and electric vehicles
October 13, 2015
Electric cars can lower your carbon footprint, but they might raise your insurance costs.
Driving a hybrid or electric vehicle is good for the environment. Thanks to the better gas mileage and fewer emissions of hybrids and the zero-emissions of electrics, these cars are great for reducing carbon footprints.
But if you're making the switch to a hybrid or electric out of a desire to save money, you might need to think again. Not only will these cars run a higher price tag at the dealership, they can also come with higher insurance premiums.
According to a new study from NerdWallet that compared the average insurance rates for four different models of electric cars to their gas counterparts, the insurance premiums for electric cars were 21 percent more expensive in each case.
Additionally, a 2008 study from the Insurance Institute For Highway Safety found that hybrid vehicles on average are more costly to insure than solely gasoline-powered counterparts.
Why the added cost?
According to the NerdWallet report, a primary reason electric cars carry higher rates is that they're worth more—70 percent more on average according to the publication. That means an insurance company has a greater liability if your car is stolen.
Additionally, hybrids and electrics both require specialty parts and labor, meaning any service or repairs will carry a higher price tag for your insurer.
How to drop the premium price
"The $7,500 federal tax credit can help offset the cost of the higher premiums.”
If you want to remain committed to your environmental principles, there are ways to drop those high insurance costs.
According to Edmunds, a lot of this will depend on your individual insurance company. For instance, some insurers have determined that hybrid drivers on average have a lower accident rate, which will drop the rates for hybrid cars. Additionally, other companies may consider hybrids and electrics to have valuable safety feature that reduce accidents and thus lower premiums. Be sure to compare auto insurance quotes to see if another company can provide a better rate.
While insurance discounts will likely vary by state, one way you can lower your premium while still driving an eco-friendly car is to opt for an economy model instead of a luxury variety. According to a report in Fortune Magazine, a high-end Tesla P85D might carry a yearly premium of $3,438, whereas a more affordable Tesla Model S 85 could only run $734 a year for the same driver.
Additionally, tax credits, including the $7,500 federal tax credit for electric cars, can help to offset the cost of those higher premiums. Some states provide tax credits for hybrids as well.