Is Electric Car Insurance Cheaper Than Petrol and Diesel Cars?

Rowan Harris 8 minutes Published: 15/12/2021

Electric cars can save you a lot of money on fuel and repairs - but what about insurance? 

In this article, we answer an important question for those tempted to take the plunge and purchase (or lease!) an electric car.

Are electric cars cheaper to insure? 

Electric cars are generally hailed as cheap to run, thanks to the cheaper cost of electricity compared to petrol or diesel, as well as various financial incentives such as road tax and congestion charge exemptions.

Unfortunately, electric cars still tend to be more expensive to insure than their petrol and diesel counterparts. 

They tend to be a bit more expensive to insure primarily because of their higher purchase prices and because there is less available data on them than ICE cars.

How much is electric car insurance?

There are many factors which come into play when an insurer is deciding the price of car insurance. Whether the car is electric or not may not be the main thing the insurers consider. You can expect to pay more for insurance for a new driver, for instance. 

Below are the average car insurance costs in the UK for the best selling EVs in the period 1st April to 1st July 2021, sourced from Comparethemarket.com.

Car Make and Model Average Annual Premium
Nissan Leaf ‘Tekna’ £421.76
MG ZS EV ‘Exclusive’ £459.12
Renault Zoe ‘Dynamique Nav’ £591.33
Tesla Model 3 Long Range AWD £1,160.35

Although these electric cars are at the ‘cheaper’ end of the spectrum, they’re still more expensive than most petrol or diesel cars (particularly when we take the Government’s Plug-in Car Grant out of the equation), which naturally makes them more expensive to insure. 

For a more direct comparison between EVs and petrol or diesel car insurance, we can take a look at the cheapest insurance groups for car models which come in both electric and conventionally-fueled varieties (sourced from Parkers, correct as of 14/12/21). 

Car Make and Model Lowest Conventional Fuel Insurance Group Lowest Electric Insurance Group
Volkswagen Golf / e-Golf 7 15
Vauxhall Corsa / Corsa-e 10 24
Mini Hatchback / Mini Electric 11 22
Fiat 500 / 500 Electric 7 15

Clearly, there’s a way to go before EVs can compete with petrol and diesel cars on insurance prices.

How much is insurance for a petrol/diesel/hybrid car?

Petrol and diesel cars have been around for a long time. This means insurers have a lot of data on what can go wrong, and how often car owners or third parties are likely to submit a claim.

Because of the higher purchase price of diesel cars and the increased cost of repairs, diesel cars tend to be around 10% more expensive to insure than petrol cars.

The cost to insure a hybrid car has dropped considerably over the years as uptake has increased and more data on their longevity has been made available. However, as hybrids (particularly PHEVs) are more expensive than petrol or diesel cars, you can expect to pay more than you would for a petrol or diesel car. 

Hybrids were also as much as 20% more likely to be involved in pedestrian crashes with injuries than their conventional twins. This is due to being near-silent at low speeds when only the battery is in use. Like electric cars, they also tend to offer quicker acceleration from standstill than petrol or diesel cars, which may make accidents more likely. 

However, new safety technology, including obstacle recognition and collision avoidance means this is no longer as big a concern for insurers. Given that many EVs also incorporate this technology in preparation for autonomous driving, we may expect EVs to be much cheaper to insure in the future. 

Why can electric cars be more expensive to insure?

Although EVs are much simpler (and in theory, easier to repair than petrol or diesel cars), there is one component that continues to drive up the cost of the car: the battery.

Batteries remain expensive to produce due to the absence of economies of scale, and the pressure on certain metals used inside. 

Although the price of batteries has come down considerably over the past decade, and shifts from companies like Tesla to a new LFP EV battery chemistry are set to bring prices down even further, there’s still a way to go before they’re at price parity with petrol and diesel cars. Until then, you can expect electric cars to be marginally more expensive to insure. 

But the high purchase price of an EV isn’t the only reason why electric cars can often be more expensive to insure. 

Because EVs are not as commonplace as petrol or diesel cars, replacement parts have been less readily available, and there are less specialist mechanics available to make the repairs. 

No doubt this will soon change with the recently announced ban on new petrol and diesel cars from 2030, which will drive demand in the electric car market, creating economies of scale, and in turn causing prices to fall, making them cheaper to insure.

Will electric car insurance come down in price soon?

There are also plenty of reasons why EVs should eventually be cheaper to insure than petrol or diesel cars. 

For instance, electric cars are less likely to be stolen, and may be more likely to be recovered when they are, due to factors like limited range, time-consuming charging, and onboard tracking technology. 

In addition, EVs tend to have a lower centre of gravity due to batteries being incorporated in a ‘skateboard’ configuration below the passenger seats, which makes them less likely to roll in the event of a collision. It’s features like this that allowed Tesla to claim the Model X was the ‘safest SUV ever made’. 

Do all mainstream insurance companies insure electric cars?

Most mainstream car insurance companies will now be able to offer cover for your EV without any issues. This wasn’t always the case. A decade ago, insurers were pretty sceptical about EVs, and didn’t have much historical data on which to base their prices or policies.

But electric cars are now in almost every niche, from expensive high performance vehicles to everyday workhorses - and the wealth of historical data shows that they’re actually pretty reliable. Great news if you’re looking to insure one yourself!

What do you need to tell your insurer if you own an EV?

Typically, you don’t need to purchase a special electric car insurance policy to cover your electric vehicle. Some insurers may offer additional incentives to those that do, but any policy that covers the vehicle, be that third party or comprehensive, is just as valid.

You will however need to notify your insurance provider about who owns the battery. To reduce the cost of purchasing an electric car, some manufacturers (such as Renault and Nissan) offer the chance to buy the car and lease the battery separately. 

If you decide to purchase a car in this way, you should notify the insurer. This way they can make sure that if the car is written off, the payments for the car and the battery go to their respective owners. 

How can you reduce your car insurance for an electric car?

As post-pandemic inflation starts to bite and premiums begin to increase again as drivers return to the roads, many of us will be left asking, ‘why is the cost of my car insurance so high’? 

Regardless of whether you own a petrol, diesel or electric car, there are a number of things you can do to bring down the cost of your premiums:

  1. Pay up front rather than monthly - If you can afford to pay the annual cost upfront, you could save 20% or more, depending on your provider.
  2. Cut down your miles - Simple really: the less you drive, the lower the risk of being in an accident.
  3. Add a named driver - If you’re under the age of 25 or have previous driving convictions, you can add an experienced named driver to your policy to help bring down the cost.
  4. Increase your excess - if you’re willing to pay more in excess, providers may reduce your premium.
  5. Shop around - Don’t auto-renew your insurance. Make sure you know how to change car insurance and that you’re always on the lookout for the best deal. This is particularly important as EV insurance costs continue to fall. 

How else can you save with an electric car?

Electric cars may have a higher RRP than their petrol and diesel counterparts, but there are plenty of other ways you can save by buying or leasing an EV.

Right now, there are a range of UK Government grants available for new and prospective EV owners. For instance, you can save up to £2,500 if you buy an electric car priced under £35,000 with the Plug-in Car Grant (PiCG). According to the Government, more than half of the electric models on the market are eligible for this discount. 

It also costs a lot less to charge an electric car, with electric car charging at home being one of the best ways to save money. Or, if you’re a heavy-duty driver, you can make great savings with some of the best electric car charging networks across the UK.

If you want to take advantage of cheaper overnight tariffs when charging at home, you can get a grant towards a smart wallbox installation under the Electric Vehicle Homecharge Scheme (EVHS). You may even be entitled to BiK tax-free free workplace charging if your company has taken advantage of the Workplace Charging Scheme

Servicing is also much easier, as electric cars have fewer moving parts and less consumables. You won’t need any new oil filters or cambelts, for instance. This means electric car maintenance costs are much lower than they are on an ICE. 

In fact, Tesla is now so confident in their vehicles that they advise owners that they do not require annual maintenance and regular fluid changes, instead recommending periodic, as-needed servicing of brake fluid, pads, and calipers, filters, and air conditioning.

To top it all off, you’ll also pay no road tax, no congestion charges, just 1% BiK tax, and you’ll find plenty of free EV parking spaces. 

Not bad, eh? 

Conclusion

Electric car insurance isn’t cheap. Not yet, anyway. But there are plenty of other ways that EVs can help to keep costs down, and there are still some things you can do to cut the cost of EV insurance. 

You can compare electric car lease deals with Lease Fetcher, for both business and personal lease deals.

If you still find the price of EV insurance off-putting, why not check out our best small electric cars and cheapest electric cars. You’ll find these are also amongst the cheapest electric cars to insure.