Insuring electric vehicles: everything you need to know

Why are electric vehicles popular?

In 2023, ZEVs accounted for 11% of all newly registered vehicles in Canada.² That number is only expected to grow in the coming years.

There are currently three types of ZEVs on the market:

1. battery-electric (BEV)
2. plug-in hybrid electric (PHEV)
3. hydrogen fuel cell (FCV or FCEV)

To avoid confusion with all these acronyms, we’ll just label all of them as electric vehicles (or EVs for short).

Keep in mind that regular hybrid vehicles (the type that don’t have plug-in charging capabilities) are not considered electric cars or zero-emission vehicles.

EVs have surged in popularity over recent years. But what exactly makes them such an attractive transportation option for Canadians?

Compared to gas-powered vehicles, there are several possible explanations:

• Lower fuel costs: The average Canadian spends around $2,000 annually on gas.³ While that may be affordable for some, electricity is still a much cheaper fuel source. The cost to charge an EV over the course of a year is only a few hundred dollars.
• Lower maintenance costs: EVs have fewer moving parts than conventional, internal combustion cars. That means there are fewer components that can break or wear out. And, EV owners don’t have to pay for oil changes, spark plug replacements, or other mechanical services related to the drivetrain. Plus, most modern EVs come equipped with regenerative braking systems, which help preserve the brake pads and reduce the need for frequent servicing.⁴
• No tailpipe emissions: Unlike gas-powered cars, EVs produce no greenhouse gases.⁵ That, combined with the relatively steep gas prices, has many Canadians turning to eco-friendly transportation options.
• Financial incentives: The Government of Canada offers up to $5,000 in incentives for individuals who buy a zero-emission or 100% electric vehicle.⁶ However, only specific EV models are eligible for these incentives.

For some drivers, there are provincial incentives, too.

In British Columbia, buyers can receive between $500 and $4,000 in incentives for eligible EV purchases, depending on the type of car and income.⁷

In Manitoba, buyers can receive $4,000 in incentives for purchasing a new EV, $2,500 for a pre-owned EV, or between $1,000 and $4,000 for leased models.⁸

In Quebec, buyers can receive up to $7,000 in incentives on eligible vehicle purchases, but this will scale back to $4,000 at the start of 2025.⁹

Incentives are also available in New Brunswick, Prince Edward Island, Newfoundland and Labrador, and Nova Scotia. However, they are not offered in Alberta, Ontario, Saskatchewan, or any of the Territories.¹⁰

What type of insurance do you need for an electric car?

Generally, auto insurance coverage doesn’t differ for gasoline cars and electric cars. The coverage options are pretty much the same, no matter which car you’re insuring. Most policies will have the following mandatory and non-mandatory coverages:

Mandatory Coverages

All drivers in Canada, regardless of vehicle type, are required to carry mandatory third-party liability coverage. It’s illegal to operate a vehicle on public roads without it.

Accident benefits coverage is also mandatory in all provinces except Newfoundland and Labrador.

Many provinces require direct compensation property damage (DCPD) coverage as well. (In some of those provinces, drivers are allowed to opt out of DCPD coverage.)

Optional Coverages

When getting a car insurance policy, you’ll have the option to add collision and comprehensive coverage if you own the vehicle outright. If your car is leased or financed, your lessor or financing company may require that you carry both.

With most insurers, if you’re willing to pay a little extra, all perils coverage gets you the broadest protection.

Keep in mind that you’ll still need to pay your deductible on any claim you make before any insurance coverage kicks in.

To learn more about how car insurance works in Canada, check out our in-depth guide on car insurance basics.

The cost of insurance for electric vehicles

While insurance for EVs follows the same rules as gas-powered cars, rates can vary depending on the type of vehicle being insured.

Generally speaking, EVs are more expensive to purchase, cheaper to maintain, but more expensive to repair. The premium price tag is largely due to the battery, which can make up as much as 40% of the car’s value.¹¹ In comparison, traditional car engines don’t cost as much.

Because EVs come with more costly components, insurance companies factor this into their pricing for the risk of EVs getting damaged or stolen.¹² Since insurance doesn’t cover routine maintenance, the lower expected maintenance costs of EVs don’t factor into insurance pricing.

Demographic factors and the variables listed below are considered by insurers when calculating your premium:

• Vehicle make and model: EVs are still relatively new to the market, so access to essential car parts and skilled technicians is somewhat limited. You can check the Insurance Bureau of Canada’s insurance rating of various car models to understand how your car insurance premiums compare.
• Cost of repair or replacement: Compared to their gasoline counterpart, EVs tend to be more expensive to repair. A damaged battery alone can cost thousands of dollars to fix, and that’s assuming repairs are still viable. In extreme cases, insurers may consider the vehicle a total loss if the battery’s replacement cost exceeds the market price of a new car.¹³ That being said, insurance won’t cover every kind of damage. Battery defects and malfunctions can also happen, which would be covered under a warranty instead. Most EV batteries come with a warranty of eight years, or 160,000 km (whichever comes first).¹⁴
• Discounts: Depending on your insurer, your vehicle may qualify for different types of discounts. Square One customers, for example, can qualify for a bundle discount when they combine their car and home insurance. For those insuring multiple cars or EVs, a multi-vehicle discount may also apply.
• Your deductible: You can reduce your cost of insurance by choosing a higher deductible. In the same manner, lowering your deductible will increase your premiums. It’s essentially all about finding the right balance between what you’re willing to pay and the risk you can comfortably manage.

All in all, the cost of insuring an electric car in today’s time should still be comparable to that of an equivalent combustion-engine model. Get a quick online quote from Square One to find out what your car insurance rates and coverages can look like.

Commonly asked questions

Does car insurance cover at-home electric vehicle chargers?

Car insurance generally does not cover at-home EV chargers, as they are considered part of your home rather than your vehicle. Instead, they would be covered under your home insurance, but usually only for losses resulting from an insured peril (like theft).

That said, there is no standardized coverage across all policies. Many insurers exclude things from their policies and may deny claims pertaining to those excluded items. It’s a good idea to check with your insurance provider whether your policy covers your charger and, if so, whether additional coverage is necessary.

Does car insurance cover electrical car battery failures?

Car insurance may offer coverage against EV battery failure, but only under specific conditions. Firstly, the event that caused the battery to fail must be an insured peril. Secondly, your limits of coverage must be sufficient to cover the damage. So, if a tree falls on your car and compromises the battery, for example, you would need comprehensive coverage to help offset the damage.

Battery failure arising from regular wear and tear or defect components is not something that most car insurance policies cover. Manufacturing defect is often addressed by the vehicle’s warranty.

Make sure you carefully review your policy and warranty documents. If you’re unsure which battery-related issues are covered, consult your provider. The cost of replacing a battery can be quite significant, so being aware of your coverage before any problems arise will help you have realistic expectations from the start.

Will electric vehicle insurance rates change in the future?

Yes, EV insurance rates will likely change over time.

Currently, EVs tend to generate fewer insurance claims than their gasoline counterparts. But EVs are still relatively new, so there are less of them on Canadian roads. As EV adoption increases and more electric cars hit the streets, insurers will have more claims experience to use in rating.

Sources

1. “Canada’s Zero-Emission Vehicle Sales Targets.” Transport Canada, Government of Canada, www.tc.canada.ca/en/road-transportation/innovative-technologies/zero-emission-vehicles/canada-s-zero-emission-vehicle-sales-targets. Accessed 7 Oct. 2024.
2. “Market Snapshot: Zero Emission Vehicles Now Account for over 10% of All New Vehicles in Canada.” Canada Energy Regulator, 5 June 2024, www.cer-rec.gc.ca/en/data-analysis/energy-markets/market-snapshots/2024/market-snapshot-zero-emission-vehicles-now-account-for-over-10-percent-of-all-new-vehicles-in-canada.html.
3. Smith, Rick, and Kate Harland. “New Analysis Finds Most Canadian Households Will Save Money in Switch to Electricity.” Canadian Climate Institute, 21 Mar. 2023, www.climateinstitute.ca/new-analysis-finds-most-canadian-households-will-save-money-in-switch-to-electricity/.
4. Swallow, Tom. “What Is Regenerative Braking and Why Is It More Efficient?” EV Magazine, 30 Sept. 2022, www.evmagazine.com/technology/what-is-regenerative-braking-and-why-is-it-more-efficient.
5. McKerracher, Colin. “EVs Are Much Lower-Emitting Than Combustion Cars.” Bloomberg, 21 Mar. 2024, www.bloomberg.com/news/newsletters/2024-03-21/evs-are-much-lower-emitting-than-combustion-cars.
6. “Program Overview.” Government of Canada, Transport Canada, www.tc.canada.ca/en/road-transportation/innovative-technologies/zero-emission-vehicles/incentives-zero-emission-vehicles/program-overview. Accessed 7 Oct. 2024
7. “Passenger Vehicle Rebates for Individuals.” Go Electric | Clean BC, Government of British Columbia, www.goelectricbc.gov.bc.ca/rebates-and-programs/for-individuals/explore-personal-rebate-offers/. Accessed 7 Oct. 2024
8. “Manitoba Electric Vehicle Rebate Program.” Manitoba Public Insurance, Government of Manitoba, www.evrebate.mpi.mb.ca/?lang=en. Accessed 7 Oct. 2024.
9. “Financial Assistance for a New Electric Vehicle.” Gouvernement Du Québec, www.quebec.ca/en/transports/electric-transportation/financial-assistance-electric-vehicle/new-vehicle. Accessed 7 Oct. 2024.
10. McIntosh, Jil. “Electrified Vehicle Sales Growing Faster in Canada than U.S.” Driving, 8 July 2024, www.driving.ca/auto-news/awards-surveys/ev-sales-electric-vehicles-canada-us-faster-study. Accessed 1 Sept. 2024
11. Rivero, Nicolás. “It’s Never Been Cheaper to Buy an EV. Here’s Why.” Washington Post, 18 Mar. 2024, www.washingtonpost.com/climate-solutions/2024/03/18/electric-vehicle-price-drop/.
12. D’Andrea, Aaron. “Ev Owners Likely to Pay More for Insurance, Report Says. Here’s Why.” Global News, 17 Feb. 2024,www.globalnews.ca/news/10296504/ev-insurance-rates-canada/.
13. Penner, Derrick. “ICBC Scraps 2022 Electric Car after Owners Faced with $60,000 Bill to Replace Damaged Battery.” Vancouver Sun, 21 Dec. 2023, www.vancouversun.com/news/local-news/ev-battery-icbc-writeoff.
14. “How Long Will the Battery on Your Electric Vehicle Last?” CAA‑Quebec, www.caaquebec.com/en/advices/maintaining-a-vehicle/how-long-will-the-battery-on-your-electric-vehicle-last. Accessed 7 Oct. 2024.

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