Why electric car insurance costs more – and how you can influence the price

Electric cars are often more expensive to insure than fossil-fuel cars. The car's value, performance and your claim-free years affect the price, as does where you live and how you drive. A recent study published in Teknikens Värld also shows large differences between different models. But what really drives up the cost?

Car insurance consists of three parts. Motor third party insurance is mandatory by law and covers damage to people and other people's property. Semi-insurance protects against, for example, fire, theft, burglary, damage to glass, damage to machinery, towing and legal protection, but it does not cover damage to your own vehicle in the event of a collision or accident. Most cars have vehicle damage insurance from the manufacturer that is valid for three years. After that, it needs to be taken out separately to also include damage to your own vehicle. It is the vehicle damage insurance that is often extra expensive for electric cars.

More expensive repairs and advanced technology increase the cost

Two of the best-selling car models in recent years are the Volvo XC60 T6 plug-in hybrid and the Tesla Model Y Long Range electric car. The Volvo XC60 T6 has 340 horsepower and costs from SEK 686,000 new. Tesla does not provide power figures, but the performance is comparable. However, the Model Y is just over SEK 50,000 cheaper when new.

Let's take an example. For a 45-year-old man living in Stockholm, with an annual mileage of 1,500 kilometers, the insurance premium for a three-year-old Tesla Model Y is 1,605 kronor per month – equivalent to 13 kronor per kilometer. For a Volvo XC60 T6 of the same model year, the premium is significantly lower, only 467 kronor per month. This means that the electric car costs a full 344 percent more to insure each month, even though the Volvo is a more expensive family car and is otherwise fully comparable.

Why are insurance premiums higher for electric cars?

Although electric cars are often associated with higher insurance premiums, the reality is more nuanced according to insurance companies Folksam, IF, Länsförsäkringar and Trygg-Hansa. All companies emphasize that the premium is based on damage statistics and historical data for each individual car model. If a model has a high damage rate or is considered to be prone to theft, this results in a higher premium.

A recurring factor behind higher insurance costs for electric cars is that they generally have higher repair costs. However, this also applies to many newly manufactured cars regardless of fuel, as they are technology-intensive and equipped with advanced safety systems and complex electronics. For example, car windows are now often equipped with integrated sensors, which makes repairs more expensive. In addition, modern cars are often built in modules, which means that a larger part may need to be replaced even if the damage only affects a smaller part. More expensive cars generally have higher insurance costs, since both spare parts and repairs are more expensive.

Could insurance premiums for electric cars decrease in the future?

The high insurance premiums negatively affect the resale value of electric cars, as the total cost of ownership of an electric car can therefore be higher than for a fossil-fueled model. This is despite advantages such as low fuel costs and a vehicle tax of only a few hundred kronor per year. The increased cost of ownership can in turn inhibit new sales and slow down the pace of transition to an electrified vehicle fleet. However, when it comes to future insurance premiums for electric cars, insurance companies are cautious about making any firm forecasts.

Folksam and IF point out that the more electric cars on the roads, the more data is collected, which improves pricing. Trygg-Hansa emphasizes that increased knowledge of claims trends can positively affect future premiums. Länsförsäkringar emphasizes that their premiums are adjusted continuously based on current claims costs.

What should you consider when taking out insurance?

For those who are about to buy a used electric car, there are several things to consider. Folksam recommends comparing insurance carefully based on price, content and deductible. Check whether insurance elements can be removed to lower the premium and investigate the possibility of a group discount, by taking out both home insurance and car insurance through the same company. Länsförsäkringar emphasizes that their insurance covers specific electric car-related damage, such as discharging high-voltage batteries and electronic faults. They also emphasize the importance of comparing insurance companies' offers. Another piece of advice is to review the level of the deductible. Often, the option of choosing a higher deductible in exchange for a lower annual premium for vehicle damage insurance is offered.

– In summary, the insurance companies' responses show that an electric car's insurance premium is not only affected by the powertrain, but by a combination of technical, economic and individual factors, says Karl Wahlin, analyst at Bilpriser .

While certain aspects, such as higher repair costs, can drive up the premium, other factors – such as the car model's damage history and the owner's profile – play an equally important role regardless of whether the car is electric or fossil-fueled.

– Does this really explain why the electric version of two otherwise comparable family cars can cost over three times more to insure? Is the difference in insurance cost a reflection of real risk, or is it a consequence of a market that has not yet fully adapted to an electrified future? It is a question that both consumers and insurance companies need to consider, concludes Karl Wahlin.