by Tim Spell - InsuranceQuotes Analyst
Auto manufacturers have made a strong commitment to electric vehicles in 2021, and this will be the year consumers awaken to the reality of a total EV future. An impressive fleet of efficient battery-powered passenger cars and SUVs is hitting showroom floors, and shoppers will be weighing the advantages of EVs against gas-powered vehicles. Electric vehicle insurance cost, along with prices, travel range, and performance will all be key in their decision-making.
The challenge for the insurance industry is infusing the rapid influx of EVs into a system mainly geared toward internal-combustion vehicles. Key to understanding the complexity of integrating the new-breed vehicles into insurance policies is knowledge of new EV cars and the enormous projected increase in 2021 EV sales.
Supplementing the gas-electric hybrids, which have been on the U.S. market for two decades, are plug-in hybrid electric vehicles (PHEVs) and battery electric vehicles (BEVs), collectively known as xEVs. These have plug-in charging that eliminates the need for gas station stops. PHEVs have a gas-engine backup, but a shorter all-electric range than pure-electric BEVs.
Spurred by the large number of 2021 PHEVs and BEVs entering the market, analysts forecast significant year-over-year increases in U.S. sales of PHEVs and BEVs.
“In my latest EVAdoption analysis,” CleanTechina analyst Loren McDonald says, “I’m projecting an increase in year-over-year EV sales in the U.S. of 70 percent in 2021 versus 2020, with sales increasing to 585,375 in 2021 from 345,295 in 2020.”
What Are the Best Electric Vehicles in 2021?
It’s the global dawning of the mass use of EVs, says Sam Jaffe, managing director of Cairn Energy Research Advisors, in a CNBC report. Jaffe points to significant models that will pique U.S. consumer interest.
“While the Tesla Model 3 and Model Y are likely to get the lion’s share of mass-market sales,” he says, “there are several new models including the Ford Mustang Mach-E and General Motors Hummer EV that will focus more attention on the electric market. In addition, several electric pickup trucks are scheduled to roll out by the end of 2021.”
These all-electric Ford and GMC utility vehicles will help acquaint consumers to the range of EV capabilities and blast old stereotypes of boring design and anemic performance. As products from mainstream Big Three brands versus “more exotic” manufacturers such as Tesla, the Ford and GMC EVs should be more relatable to consumers.
2021’s EV excitement is also being generated by the announcement that the U.S.’s best-selling vehicle – the Ford F-150 – will be available in 2022 as an all-electric model.
The svelte 2021 Ford Mustang Mach-E SUV/crossover has a starting price of $42,895, and its high-torque electric motors send it from 0-60 in the 5-second range. A pricier GT Performance Edition whittles that time to 3.5 seconds. Insurance is a bit pricey – with a projected average yearly cost approaching $3,000 for the base model.
GMC boasts its 2022 Hummer EV “supertruck” is an “off-road beast” with a three-motor e4WD system that can conquer rough terrain. The first Hummer EV will start at $112,595, but less-expensive models will follow.
Its average yearly insurance cost is expected to be in the mid-$3,000 range. General Motors also offers the all-electric Chevrolet Bolt subcompact hatchback and Ford the Fusion Plug-In Hybrid, both priced in the mid-$30,000s.
Tesla, the world’s leading EV company, offers an in-house insurance option for its vehicles such as the aforementioned Model 3 luxury sedan and Model Y SUV with starting prices at about $38,000 and $52,000, respectively.
Tesla owners in California have the choice of purchasing Tesla Insurance, which Tesla reports is a “competitively priced insurance offering designed to provide Tesla vehicle owners with up to 20 percent lower rates, and in some cases, as much as 30 percent. Tesla Insurance offers comprehensive coverage and claims management to support Tesla owners.”
Tesla places more stock in the safety of its Autopilot driver-assistance system than a conventional insurance provider, and provides a discount based on the car’s level of autonomy. Tesla reports it has plans to extend insurance coverage to other states.
“As far as Tesla’s pricing goes, they aren’t the cheapest option for insuring your Tesla (our research shows Geico and Progressive to be cheaper),” reports Bankrate, “but they are at the lower end, coming in at roughly $1,000 less a year than large carriers like Farmers and State Farm.”
Since Tesla Insurance only covers Tesla models, owners of a Tesla and other brand vehicles must take into consideration that they’ll lose the benefit of a multi-policy discount offered by traditional providers.
Teslas have the insurance repair downside of high aluminum-build content (varies with models) and the need for specialized tools. Estimated yearly average insurance cost is $1,900 for a Model 3 and $2,500 for a Model Y.
More Affordable Electric Vehicle Options
There are more-modest, well-established EVs available with affordable price tags that offer efficient performance and lower insurance costs. Nissan introduced its all-electric Leaf, the world’s first mass-market electric vehicle, about a decade ago. An all-new 2021 model with a $31,620 starting price is offered with a sleeker body, more technology, and greater performance and range. Its average yearly insurance cost is about $1,500.
In terms of brand longevity, Toyota’s Prius trumps all others. It’s been on the U.S. market for about 20 years in gas-electric hybrid form, and a plug-in variant has been offered for about 9 years. The 2021 Prius Prime plug-in has a $28,220 base price and a 640-mile driving range in gas-electric hybrid mode. In full-electric mode, range is limited to about 25 miles. Yearly average insurance cost for a Prius Prime is about $1,140, which is slightly higher than its traditional-hybrid siblings.
Electric Vehicle Insurance Costs and Discounts
Electric vehicle insurance costs vary from state to state. For instance, the average yearly insurance cost for a Prius Prime owner is about $800 in Maine and $2,400 in Michigan. Multiple factors contribute to insurance costs variances from state to state:
- States with higher population densities have higher rates – there’s a greater probability of accidents with more vehicles on the road
- Minimum liability requirements established in most states affect rates
- States with higher costs of living have higher insurance rates - when moving out of state, it’s wise to shop around because an insurance company offering the lowest rate in one state may not be the lowest in another
A Prius Prime with its plug-in capability is slightly higher to insure than other Prius models, and all-electric EVs have marginally higher insurance rates than gas-powered vehicles – but there are equalizing factors.
"If you have an EV, your insurance will probably look much like that of a gas-powered vehicle -- with some notable differences," reports Forbes. "You'll likely pay a little more to insure an EV. That's because it generally costs more to repair an EV than a conventional car. But the increased cost to insure an EV could be offset by tax credits (depending on which vehicle you buy)."
EVs may qualify for state and federal incentives, so it's important to check for possible tax rebates before purchasing one. Since EV ownership indicates a green, energy-efficient lifestyle, insurance discounts also are available, so it’s important to compare quotes from several providers to get the best electric vehicle insurance.
The Forbes article cites the scarcity of repair shops and repair costs as the key reasons for higher EV insurance rates. If one part is damaged in an accident, the entire part, which may perform multiple functions, has to be replaced. Because the technology is new, aftermarket parts are lacking, so costlier original equipment parts often have to be used. Battery replacement cost is significant, and when batteries are damaged or leaking, extra safety precautions have to be taken.
As with gas-powered vehicles, electric vehicle insurance costs can vary with demographics. According to an insurancequotes.com study, marriage, gender and age may affect insurance rates. The reason is straightforward: "Younger people cause more accidents than older people -- unless they're married -- and men cause more accidents than women."
EV insurance isn’t limited to four-wheel transportation. Owners of electric bicycles or “ebikes,” a notably fast-growing market in 2021, and electric scooters have insurance needs.
“Ebike insurance is not legally required, but it may still be a good idea,” reports Treehugger, a sustainability website. “In general, ebikes range in cost from about $400 to $2,000 or more, so if it’s stolen or damaged, an ebike policy can help you buy a replacement or pay for repairs.
Likewise, if you get in a bad cycling accident and need to cover roadside assistance, medical costs, or even third-party liability, ebike insurance will have your back.”
Buying a New EV Car in 2021
Those interested in purchasing an electric automobile should be encouraged by the fact that insurance cost isn’t a critical factor for most new-car shoppers. The greatest concern for EV buyers is range, which is not an issue for gas-electric or plug-in hybrid owners. Toyota estimates its Prius Prime has a range of 640 miles. While the $169,000 Lucid (Motors) Air Dream Edition boasts a 503-mile range, pure-electric 2021 vehicles have ranges from 110 to 300-plus miles.
A consideration that works in tandem with range for travel needs is the practicality of EV charging. The choices are at-home or faster public charging stations.
“Many EV owners have opted for a home charger, creating an electric version of what amounts to a private gas station,” reports AARP. “Plug your car in when you get home, tell it to start charging when electricity prices are lowest at night, and the next morning you're ready to go. The cost of electricity used for charging at home can be less annually than what you pay to run your air conditioner,” according to the U.S. Department of Energy.
“Plus, the availability of public charging stations in the United States varies widely, with fewer in the Plains states and mountain West where distances between populated areas can be greater. The U.S. has more than 112,000 gas stations, according to a 2018 U.S. Census Bureau survey. But it has only around 28,000 charging stations with about 94,000 outlets, November 2020 data from the U.S. Department of Energy shows.”
The rapid growth of the EV market has stimulated nationwide investment in charging stations. A strong push toward EV programs is pledged by the incoming presidential administration, which includes 555,000 new EV charging stations, and new tax credits for consumer purchases and retrofitting factories for EV production.
“The electric-vehicle market in the United States is expected to flourish with government incentives driving EV ownership,” according to a recent Frost & Sullivan analysis. “The xEV market in the U.S. is estimated to register a nearly five-fold growth, reaching almost 7-million-unit sales by 2025 from 1.4-million-unit sales in 2020.”
The increase in models, competition and government incentives over the next several years will help lower the price of electric vehicles and the insurance policies that cover them. With greater competition among suppliers comes lower battery and parts costs, and reduced repair expenses and insurance rates.
Battery technology also will improve to extend driving range, and charging and battery-swap stations will be more accessible. These factors, along with heightened EV familiarity, will raise consumer confidence and promote EV adoption.
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