How are electric vehicles insured?

With high gas prices and the increasing desire to shrink their carbon footprint, more Canadians are looking at electric vehicles (EVs) as a solution. According to a recent survey by EY Mobility Consumer Index, there’s been a six per cent spike in consumer interest in hybrid or fully electric vehicles from 2022, and more Canadians expected to make the switch over the next few years. 

If you’re weighing the pros and cons of getting an EV, you’ve probably thought about how to insure it. There's a misconception that owning an EV automatically means high auto insurance premiums, but that’s not necessarily true.  

Let’s take a closer look at what factors drive up your auto insurance rates, how much you would pay for EV insurance in comparison to a regular car, and how you can save on EV insurance. 

Factors that affect EV insurance rates  

As with all cars, insurance for your EV depends on various factors, including your driving record, claims history, and demographics. But with EVs, insurance companies also consider the make and model of your vehicle, battery replacement cost, and repair costs.  

EV make and model  

There are three types of EVs: 

• Battery-operated electric vehicles (BEVs) that use an electric battery to power the motor. 

• Plug-in hybrid electric vehicles (PHEVs) that use a combination of battery and electric motor. 

• Hybrid electric vehicles (HEVs) that use both an electric motor and gas engine.  

The type of vehicle you have makes a difference to the cost of insurance. BEVs, for instance, might have higher premiums, as the cost of replacing a damaged or defective battery is higher. And just like newer models of traditional vehicles (or for that matter, sports or luxury cars) cost more to insure, so do some EV models.  

For example, insurance for the 2023 TESLA Model X Plaid costs $292 per month, while monthly premium on the 2018 KIA SOUL EV costs only $171. Generally, the more expensive a car is to replace, the higher its insurance premium. 

Battery replacement costs  

While the lack of charging stations was a deterrent in previous years, the EY Mobility Consumer Index survey notes that battery replacement costs have emerged as a new concern preventing people from going gas-free.  

EV batteries are extremely expensive to replace, and as one Ontario family found, battery replacement (outside the dealership’s warranty period) would have cost them a whopping $23,000. Apart from battery depreciation over time, even a small defect or slight damage to battery packs is forcing insurance companies to write off the EVs – thereby driving up insurance premiums.  

One workaround provided by EV manufacturer, VinFast is a battery subscription, where customers pay a monthly fee to lease a battery and receive routine battery repair, maintenance, and replacement. 

Repair costs and lack of trained technicians 

According to an industry report, the average cost to repair an EV was nearly $7,000 in Q2 of 2023. As EVs use Original Equipment Manufacturer (OEM) parts, they cost more to repair and therefore, insure.  

Since EVs are still a relatively new industry, manufacturers, consumers, and insurers are still adapting to challenges in the industry. Another one being the lack of trained technicians. And this is not a challenge just in Canada.  

In fact, the global EV industry is seeing a shortage of trained technicians, leaving EV owners with a long wait time for repairs and high repair bills. 

Now that you know what factors drive up EV insurance premiums, let’s look at how much it costs to insure an EV versus a regular vehicle.  

How much does it cost to insure an EV? 

In addition to the above, the cost to insure an EV also depends on the coverage you require and any additional endorsements that you opt for. As with traditional auto insurance in Ontario, there’s mandatory third-party liability insurance, direct compensation-property damage (DC-PD), accidents benefits, and uninsured automobile coverage.  

In addition to the standard coverage, you can opt for endorsements where there are coverage gaps. As we’re seeing long wait times for EV repairs, you can opt for the Loss of Use coverage. This ensures that you are covered with a rental car in the interim. 

Now let’s look at how much one would pay for insurance on a more affordable EV, like the Nissan Leaf EV when compared to gas-powered cars. A 30-year-old female living in Toronto with 10 years of driving history, no claims and convictions would pay an average of: 

• Nissan Leaf EV: $2,561 per annum 

• Gas-powered Chevrolet Cruz: $2,598 per annum 

As illustrated, there isn’t much of a difference between auto insurance paid on an EV versus that of a similar gas-powered vehicle.  

While EV repair and replacement costs may seem prohibitive, there’s a silver lining too. Not only can you save on gas, but you can also take advantage of rebates and insurance discounts.  

How to save on EV insurance 

As a way to incentivize people to switch to low emission vehicles, many insurance companies offer discounts to customers who drive an EV. For instance, TD offers a Green Wheel Discount when you insure your EV with them.  

Compare multiple insurance providers to see who can offer the best rates for EV insurance.