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Car Insurance for Electric Cars

They’re finally here! Legitimate, mass-marketed and mass-produced cars that don’t need a single gallon of gas to function. Carbon emissions are close to zero. You can get a $7500 tax break. Heck, the sticker price is even beginning to fall.

Sounds like a win-win-win, right? Pretty much, except for one small and perhaps surprising point -- car insurance is almost certainly more costly for an electric car relative to a traditional gas guzzler.

So then why is electric car insurance so expensive?

One of the major reasons is that electric cars are just so new -- no one is completely sure how they age, or how they stand up to certain accidents in their third year, and so on. The car insurance industry rests upon a mountain of data to balance and weigh risk, but when it comes to electric cars there simply isn’t that much data to use. In response, the risk is shifted back to the consumer.

This lack of historical knowledge carries over to repairing electric cars. This new generation of batteries and engines are rare and expensive, a situation exacerbated by the high demand for these vehicles, and relatively low supply. Insurance companies will translate the high cost of potential repairs into higher monthly premiums. Though there are a handful of carriers that try to give discounts to electric car drivers, the fact is that they simply cannot justify them based on claims data.

In other posts we have consistently highlighted the three main factors that determine the cost of insuring a vehicle: safety ratings, damage susceptibility and likelihood of theft. And in each case, in the context of electric cars, the problem of a lack of historical knowledge presents itself yet again.

For example, the Chevy Volt gets pretty decent safety ratings in early reviews. However, some people tend to think that electric cars are less safe, because of the lightweight material that are used to build them. This leads to the question of damage susceptibility. And we also don’t really know how its parts age. We also don’t know how likely they are to be stolen. Yes, thieves usually have their eyes on sexier, sleeker cars -- but most thieves aren’t stupid (though some are), and the idea of never having to pay for gas is universally attractive. Plus those Volts aren’t bad looking at all...

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