Are EVs and hybrids more expensive to insure than ICE vehicles? Mercury Insurance expert explains

September 12, 2024 at 12:31 PM EDT

(BPT) - With a variety of powertrain options on the market, consumers who are shopping for a new vehicle have a lot to mull over these days. Buy another internal combustion engine (ICE) vehicle? Go fully electric? What about a hybrid? Regardless of vehicle type, it's important for shoppers to understand the total cost of ownership before making a commitment, as this will help minimize unexpected expenses and headaches down the road.

'The 'total cost of ownership' equation includes factors like insurance premiums, fuel efficiency, repair expenses and home charging infrastructure if purchasing an electric vehicle (EV), among other aspects,' said Chong Gao, director of product management R&D at Mercury Insurance. 'An EV, for example, might seem appealing for its expected fuel savings and lower maintenance costs, but insurance for them is on average 20% higher compared with an ICE vehicle, and they are typically more expensive to insure than hybrids as well. However, as more people adopt EVs and insurance companies gather more data in the future, their insurance costs will likely even out.'

When deciding between an ICE vehicle, hybrid or EV, here are some important distinctions to keep in mind:

Fueling/charging costs: Because hybrid vehicles have both a gas engine and electric motor, they are more fuel efficient than strictly ICE vehicles, as they can switch between the two motors while driving. Additionally, hybrids never need to be plugged in because the battery is recharged via the gas engine, eliminating the need to install home charging or navigate public chargers.

When it comes to charging EVs, the Department of Energy reports that about 80% of all charging is done at home, which J.D. Power notes is the ultimate convenience and most satisfying aspect of EV ownership. There are two types of EV charging solutions available for the home, both detailed at caranddriver.com. Consumers should be aware that they will need to consult an electrician to install a Level 2 charger, but some states and localities offer incentives to help cover the cost. Consumers should also be aware that satisfaction with public EV charging overall is still poor, according to many industry reports.

Maintenance: When it comes to maintenance for ICE and hybrid vehicles, there are several upkeep items that can add to the cost of ownership over time, such as air filters, oil changes and tire rotations. Both require similar maintenance schedules and incur comparable costs. One notable exception is that a hybrid's battery will eventually need replacement, which can be costly, but U.S. law requires that all hybrids come with battery warranties of at least eight years or 100,000 miles, which should offer consumers peace of mind if they plan to keep the vehicle over the long term.

EVs, on the other hand, do not need many of these routine services as they lack an internal combustion engine, pistons, valves and moving parts. This can result in lower routine repair and maintenance costs compared with ICE and hybrid vehicles, but J.D. Power reports that EV owners replace tires more frequently than others. And like hybrids, the EV battery will also need to be replaced down the road, but all new EVs come with a generous battery warranty.

Insurance: While EVs may offer a number of advantages in terms of reduced maintenance and fueling costs, the cost of insurance might offset these potential savings. 'EVs cost more to insure versus their ICE counterparts because they generally cost more to buy, and consequently more to repair or replace,' said Stephen Crewdson, senior director of insurance business intelligence at J.D. Power. 'And while today's EVs have fewer moving parts, it can be costly when they need replacement. If the battery pack is damaged, for example, the battery itself is a large expense and certain safety protocols are often necessary, which leads to a higher repair bill. Plus, there aren't as many repair shops with technicians trained to work on EVs, which means these facilities can charge more for the specialized knowledge they provide.'

'The best vehicle type for a particular consumer will ultimately come down to budget, lifestyle factors and personal preference. Hybrids serve as a great bridge between ICE and EVs by offering fuel efficiency and a reduced carbon footprint for consumers who aren't yet ready to make the leap to an EV,' said Gao.

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Are EVs and hybrids more expensive to insure than ICE vehicles? Mercury Insurance expert explains

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