Tesla's 'Affordable' Model 3 Costs a Bundle to Insure, Study Claims

Matt Posky
by Matt Posky
teslas 8216 affordable model 3 costs a bundle to insure study claims

The Model 3 was intended to be Tesla’s affordable alternative for the mass market and, for the most part, that’s what it has been. Granted, the automaker did opt to prioritize the production of higher trim levels as a way to maximize profitability. But, given its financial situation, it was an understandable strategy. The Model 3 is still the cheapest way to get into a Tesla. However, it’s not the cheapest vehicle to own — especially when it comes to insurance rates.

Last year, AAA said premiums on Tesla vehicles would likely go up 30 percent after reviewing data from the Highway Loss Data Institute. At the time, Tesla said the analysis was “severely flawed and is not reflective of reality.” But the auto club stated the HLDI’s findings matched its own research, as well as numerous other sources.

“Looking at a much broader set of countrywide data, we saw the same patterns observed in our own data, and that gave us the confidence to change rates,” said Anthony Ptasznik, chief actuary of AAA.

The contributing factors to the brand’s above-average insurance rate are twofold. For whatever reason, Tesla models are subject to an abnormally high number of incidents that result in insurance claims, but they’re also more expensive to fix. “Teslas get into a lot of crashes and are costly to repair afterward,” explained Russ Rader, spokesman for the Insurance Institute for Highway Safety, which operates as the HLDI’s parent organization. “Consumers will pay for that when they go to insure one.”

For the Model 3, the result is tragically high premiums. A recent study conducted by Gabi Personal Insurance Agency Inc. and posted by Automotive News shows the EV’s average insurance cost across 150 ZIP codes is $2,814 per year. That’s $35 less than the cost of insuring a Porsche 911, using the same metrics.

“In the last month we had more and more people coming in with Model 3, and they were all complaining about high insurance costs,” said Gabi CEO Hanno Fichtner. “We found cheaper deals for them, but not as cheap as we thought they would be. We even had customers tell us they are returning their Model 3 due to the high running costs.”

Those cheaper deals bottomed out at $1,958 annually, according to the study. But Gabi also found Model 3s with insurance payments as high as $3,644 per year. For the sake of comparison, the average cost to insure the Chevrolet Volt Premier was $2,102 annually while the Honda Civic LX was at $2,068. While insurance rates for EVs and hybrid vehicles are typically a little higher than their internal combustion rivals, the Model 3 seems quite a bit higher than average.

Our own cursory examination of Chevy Bolt insurance averages also yielded lower premiums, based on several responsible owners living in various states and Canadian territories. Direct comparisons using various insurance outlets also showed the Model 3 costing significantly more to insure than the Bolt, but not at a consistently predicable rate.

According to Fichtner, the high cost of replacement parts and Tesla-specific body shops are major contributors to the high costs. This is also why other Tesla vehicles cost so much to ensure. For example, Gabi’s analysis of the base Model X 75D showed insurance rates averaging $3,410 per year, which is only about $100 less than an Audi R8.

Tesla has commented on the insurance issue in the past, saying it would take steps to remedy the situation. But there’s not much it can do until it lowers the costs associated with repairs or convinces its customers to drive safer and make fewer claims. In the interim, do you homework if you’re considering an electric vehicle as your next car. They are not created equal in the all-knowing eyes of the insurance gods.

[Image: Tesla Motors]

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2 of 44 comments
  • Craiger Craiger on Aug 28, 2018

    The government should stop insurance companies from discriminating against electric cars! Big Oil! Big Coal! Halliburton! Trump!

  • WildcatMatt WildcatMatt on Sep 17, 2018

    Keep in mind that from a parts perspective, there are likely very few aftermarket suppliers in the mix right now. And given the brand demographics I imagine most insureds would insist on OEM parts. That will have a huge impact on claim costs. Commenters who have gotten quotes significantly lower than the samples in the article will almost certainly have some combination of the following: a) An insurer who hasn't filed new rates and/or vehicle symbols for the Model 3 yet. b) An above-average CBUS score and/or very low tier placement. c) Almost every possible discount applied. d) A squeaky clean record. e) An insurer that writes only preferred or closed-population business (eg USAA). It's also worth mentioning that this article states that Model 3 rates are _increasing_. If you call your carrier and quote to add to an existing policy, you're getting a quote based on old rates -- if you called to start a new policy you might get a different rate.

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