Tesla Insurance: What to Know

Tesla insurance can be expensive, but new coverage options are emerging. To get the best rates, shop around.

Andrew MarderMay 13, 2020
Tesla Insurance: What to Know

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Tesla's electric vehicles are designed to be some of the safest cars on the road. Even when Autopilot, the carmaker's partially automated driving system, is turned off, Tesla reports quarterly crash numbers at one-third the rate of other cars. Considering that safety record, you might be surprised to know that insuring them can often cost much more than the same coverage for a comparable car.

To address the higher rates, the carmaker itself is rolling out an insurance option it claims will be less expensive for Tesla owners called Tesla Insurance.

Why Teslas are expensive to insure

The more your car costs, the more it’s going to cost to insure. If you’re in an accident and need repairs, your collision insurance is going to pay unless it was totally someone else’s fault. That means insurers see your fancy car as a bigger risk to them.

Teslas come in above the national average for car costs and line up more closely with luxury cars and other electric vehicles. For example:

  • A Tesla Standard Range Plus Model 3 starts at just over $40,000.

  • The Long Range Model 3 will cost you over $50,000.

  • The Model S jumps up in price quickly, with the Long Range edition coming in at over $80,000.

Teslas are made out of expensive parts, contributing to their base cost. For starters, a Model 3 battery costs thousands of dollars to replace.

Tesla repair costs are also higher due to the use of aluminum in the bodies, which is much more expensive than traditional materials. If you damage a plastic or steel part on your 2012 sedan, an auto body shop can fix it for relatively little cost. The same isn’t true for aluminum.

All of those potential repair costs come back to owners in the form of higher Tesla car insurance prices. To try and ease the burden on owners, Tesla initially tried partnering with Liberty Mutual in the U.S. under a program called InsureMyTesla in 2017.

While the company never officially announced the end of the partnership, its InsureMyTesla website has disappeared in the U.S. and Tesla announced a new plan in late 2019.

What is Tesla Insurance?

The new plan was for Tesla Insurance to come directly from the carmaker. It turns out, Tesla customers aren't the only ones frustrated with the cost of insurance — Tesla CEO Elon Musk has also been vocal.

He, like many car owners, believes that Teslas should be cheaper to insure because they’re more advanced and safe. The U.S. National Highway Traffic Safety Administration has awarded Tesla a perfect five-star safety rating multiple times for different models.

To address the pricing problem, Tesla has taken matters into its own hands. Tesla is now a licensed broker providing insurance to Tesla drivers in California from State National Insurance. Musk has said the cost should be about 20% lower than average and that the program will continue to roll out “anywhere insurance prices are high.”

How Tesla Insurance works

Tesla says it understands how drivers use its cars and takes all of the cars’ safety features and crash avoidance systems into account when pricing insurance. The company says it does not use personalized driving data collected by the vehicles in its pricing. In addition to liability, collision and comprehensive insurance, Tesla also offers additional coverages for wall chargers, electronic key replacement and identity fraud.

In its initial filings, Tesla also included liability and collision insurance discounts for the use of autonomous driving features, ranging from 5% to 30% depending on the level of autonomy in use. Families with multiple Teslas would also be eligible for discounts.

To summarize, Tesla is planning to use its knowledge of its cars’ safety features and partially automated driving technology to cut insurance costs for drivers, especially those who take advantage of the company’s Autopilot system.

Until then, comparing several car insurance quotes to make sure you're getting the best deal will be crucial to keeping rates down.

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