Does Owning an Electric Vehicle Make Dollars & Sense?

 By Catherine Powell

Image courtesy Pixabay

While owning an electric vehicle (EV) is touted as more environmentally friendly, if you’re thinking about going electric, you had better talk to your insurance agent to make sure that you’re properly covered on both your auto and homeowner’s policies.  That’s right, owning an EV can alter not only what you pay for auto insurance but homeowner’s insurance as well.  That’s because EVs need to be recharged and to do that you need to have some electrical work performed in your garage.  Unfortunately, you can’t simply plug in an EV to one of your existing outlets.  You’re required to install a purpose-built EV charger and possibly a bank of lithium-ion batteries to top up your vehicle.  Before you drive off the lot with an electric vehicle, here’s what you need to know.

1. Do EVs cost more to insure? – That depends on what you’re now driving.  It also depends on the model of EV you’re looking to acquire.  That being said, according to insurance industry statistics, gas-powered vehicles cost an average of $1,232 per year to insure.  EVs on the other hand cost an average of $1,674 per year to insure.  The reason EVs typically cost more to insure is that they’re typically priced higher than most family sedans.  That doesn’t mean there aren’t bargains to be found.  The average price to insure a Nissan Leaf is just $1,389.  That means your best bet before you run down to the dealer is to talk to your insurance agent so you can compare the cost of insurance for various vehicles.

2. How will an EV affect my homeowner’s insurance? – Don’t panic.  While it can cost from $200 to $1,000 or more to install a home charging station for an EV, this shouldn’t adversely affect the price you pay for homeowner’s insurance, unless you install solar panels with it.  In fact, by upgrading your home’s electrical system, you could actually wind up reducing your homeowner’s premiums.  Even if your home charging station comes equipped with a large bank of lithium-ion batteries, you shouldn’t be assessed an increased risk of having a house fire.  According to NTSB statistics, electric vehicles have the lowest incidence of fires. 25 per 100,000 units, versus 1,530 per 100,000 units for gas vehicles and 3,475 per 100,000 units for hybrids.  Just make sure you hire a licensed contractor familiar with installing EV charging stations.

3. Can you offset the higher sticker prices of EVs? – Absolutely.  The federal government offers up to $7,500 in tax credits for some electric vehicles.  Some states, such as California also offer an additional incentive for EV purchases.  (California currently offers a $4,500 tax rebate.)

4. How much will my electric bill jump if I buy an EV? – One of the first things you need to realize is that owning an EV will cause your electric bill to increase.  We’re not talking about charging a cellphone or a tablet here.  Depending on how far you drive per month, what you can expect to pay depends on the rate your utility company charges times the number of kilowatt-hours your vehicle uses.  If you use the average rate of 13.27 cents per kWh paired with a Tesla Model X with a completely drained battery, it should cost no more than $15.92 to top it up.  Since a Model X has approximately a 300-mile range, this makes the cost per mile $0.049 per mile.  By comparison, a typical gas-powered vehicle with an average 24.9 MPG fuel economy costs $0.125 to run at $3.00 per gallon, which is twice the price.  (It’s even more while prices for regular are above $4.00 a gallon.)  The bottom line is while your electric bill will increase, you’ll still save money over what you’re currently paying at the pump.

5. Are EVs more expensive to maintain? – Yes and no.  When it comes to routine maintenance, EVs are much less costly since you’ll never need to have an oil or air filter change, a tune-up or a radiator flush and fill.  EVs don’t have transmissions or exhaust pipes either.  However, they can be more expensive to service if you get in an accident since an EV battery pack can run $15,000 or more.

6. Why are EVs bound to get more popular and less expensive to own and operate? – Look at the price on any gas pump right now and you’ll have one answer.  The cost of gasoline is always going to be more volatile than the price most consumers pay for electricity.  That’s why EV sales have been rising by 40% or more for the past few years.  In the past decade, ownership of electric vehicles has jumped from just over 10,000 to more than 11 million.   As EVs become more prevalent and less expensive, it’s obvious that owning an EV will be embraced by more motorists.  The Department of Transportation has estimated that by 2030 12% of all vehicles on the road in the US will be electric.  Those statistics have been supported even during the pandemic which saw overall car sales drop by 16% while EV registrations were up by 41% in 2020.  As for batteries, despite falling battery pack costs and increased demand, the sourcing of raw materials has been problematic, forcing the industry to create a Global Battery Alliance which was created to help stabilize the supply chain to help battery manufacturers keep deliveries on schedule.  

7. Getting a charge out of EVs? – While supply-side challenges for both EV charging stations and batteries have been in the news lately, the industry has rallied to rectify these bottlenecks.  While there are currently around 41,000 public charging stations in the nation, finding one that isn’t prohibitively expensive to access can be a problem to all but Tesla owners.  (Tesla maintains an extensive Supercharger Network for owners of its EVs.)  Since different model EVs require different charging standards, this has created somewhat of a scavenger hunt for other EV owners.  President Biden has earmarked $174 million toward building 500,000 new EV charging stations across the country by 2030.  Florida currently has a network of 2,476 charging stations which provide 32 Level 1 chargers, 4,837 Level 2 chargers, and 1,248 fast chargers.  Issues concerning battery manufacturing and recycling are also being addressed to keep up with the ever-increasing demand for EVs.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com/