What Does Tesla Insurance Cost..? Answering this question requires context because every individual driver is different… You should consider Tesla insurance cost based on three factors:
- The dollar value of the annual premium
- The implications of the safety technology in a Tesla, and
- The total cost of ownership of your Tesla
While insurance for Teslas is available from multiple carriers, you want the combination of lowest price and best coverage. Over time, Tesla’s own insurance program may be the best choice for some people.
What Does Tesla Insurance Cost?
I do not own a Tesla myself, but I’ve test driven them several times and the experience is like nothing else.
They’re excellent cars to drive.
As such, my experience with Tesla insurance cost is based on my experience as an insurance broker placing affordable insurance for individual Tesla owners and commercial auto insurance for Teslas from other carriers.
I’ve seen annual premiums for Tesla insurance from $2,000-$7,000 per year for collision, comprehensive and liability from different insurance carriers… This annual premium depends on the type of Tesla – the vehicle’s replacement value – as well as other factors, such as your location, driving record and deductible.
However, Tesla has its own insurance program which is what I’m talking about here… In many ways, Tesla’s own insurance program may be the best option for many Tesla owners over time.
On a recent earnings call, Elon Musk and Tesla CFO Zach Kirkhorn provided insight into the Tesla Insurance program.
Specifically, Elon Musk said that the goal of providing Tesla insurance is to help reduce the total cost of ownership of owning a Tesla over time.
Tesla Safety Technology
Teslas have integrated some of the most advanced real-time safety technology available in any vehicle anywhere.
Every Tesla is built with multiple proximity sensors, accelerometers, speed, braking and turning monitoring, security monitoring cameras, acceleration tracking, and real-time location monitoring to collect data about driving and road conditions.
All of the above technologies may be used by Tesla to inform its own insurance program underwriting to customize an auto insurance policy just for you.
No other insurance carrier has a vertically integrated technology platform like Tesla does in terms of collecting data about its drivers.1
In addition, Tesla is famously pursuing a full-self driving technology that will enable the vehicle to drive itself. This technology is built into every Tesla, whether it’s enabled or not.
When combined with the data around the cost of repairs for collisions, Tesla has built a positive feedback loop that includes an incentive to reduce damage to its vehicles and price insurance as affordably as possible based on potential property damage claims.
Total Cost Of Ownership
On a recent earnings call, Elon Musk said publicly that his goal with the insurance program is to reduce the total cost of ownership (TCO) of a Tesla over the life of the vehicle to be as low as possible.
The most significant factor in total cost of ownership is the initial price paid to buy the vehicle… However, other factors in TCO include:
- Fuel costs (electricity or gasoline)
- Required maintenance
- Insurance premiums
- Repairs
- Financing
- State fees
- Depreciation
- Incremental revenue generation2
When comparing TCO between different vehicles, you have to use similarly priced, comparable vehicles, because purchase price is the biggest factor in TCO.
Recently Kelley Blue Book rated the Tesla Model 3 as having a lower cost of ownership when compared to similarly priced internal combustion engine (ICE) vehicles in its class, such as the Volvo S90 and Audit TT.
Another evaluation compared TCO of a Tesla Model 3 to a Toyota Camry and BMW 3 Series and found that they had similar TCOs.
Insurance is another big factor, as well as the cost of fuel, maintenance, repairs and depreciation. Anecdotal evidence suggests that Teslas have good resale value (lower depreciation) and lower cost of maintenance than some internal combustion engine vehicles.
Finally, when (not if) Tesla bidirectional charging is introduced, buying a Tesla will be like getting the biggest Tesla Powerwall home energy storage system on Earth – and getting the car itself for free…
Tesla bidirectional charging will also enable Tesla owners to participate in demand response programs that make it possible to earn money from your Tesla.
Tesla Insurance Cost Summary
It’s too early to know whether Tesla Insurance cost will be less expensive than buying insurance from other carriers.
Insurance is not a commodity so comparing the cost of insurance policies requires context because every individual driver – and every insurance policy – is different.
Other factors, such as EV fires or cyber attacks, could drive up costs for auto insurers which they could pass on to you.
However, Tesla insurance program aims to provide a customized policy for each driver based on their driving patterns and the company has an edge over every other insurance carrier in terms of data collection.
Ultimately, as Tesla Insurance increasingly competes with the GEICOs of the world, I believe Tesla Insurance will be the lowest cost source of insurance for some Tesla owners, and may be even other vehicle owners in the future.
Footnotes
- Elon Musk also said that the data provided from any accidents is being used in a way that can influence the Tesla manufacturing process such that vehicles are built to be more resilient and/or be repaired more quickly so drivers can get back on the road as fast as possible.
- Incremental revenue generation is not often considered a factor in calculating total cost of vehicle ownership. However, with Teslas (and probably other electric vehicles in the future) your vehicle may be able to earn you money which could help pay for the purchase price of the car. With Tesla, you may be able to earn money from your vehicle in two ways: 1) through allowing your Tesla to act as an automated taxi when self-driving technology is mature and reliable, and 2) by participating in a demand response program when Tesla bidirectional charging is enabled.
