May 15, 2026
While we adhere to strict editorial guidelines, partners on this page may provide us earnings.
The federal government's electric vehicle (EV) affordability program offers up to $5,000 in rebates for drivers looking to purchase a new EV. And the pitch is compelling: Lower fuel costs, reduced maintenance bills and a smaller carbon footprint. What often doesn't appear in the dealer's total-cost-of-ownership calculation is a significantly higher insurance premium — one that can quietly absorb a large portion of those savings.
But according to Sussex Insurance, EV owners in Canada pay up to 36.8% more in annual auto insurance premiums than drivers of comparable gas-powered vehicles. Analyzing 12 months of premiums and claims data, Sussex found that the average EV driver paid $3,131 per year in insurance versus $2,289 per year for gas-powered vehicles (1). For many buyers, the number comes as a surprise — because it arrived after the purchase decision was already made.
Why EVs cost more to insure — the repair cost reality
Insurance premiums are driven largely by expected claims costs. EVs present a different risk profile than gas vehicles at almost every point in the repair process, and that profile is more expensive.
Advertisement
Repair costs for EVs are significantly higher when collision or comprehensive damage occurs (2). Specialized components — sensors, cameras, aluminum body panels and proprietary software systems — require certified technicians and, in many cases, manufacturer-authorized facilities. In smaller Canadian markets and rural areas, approved repair shops are scarce, which extends claim timelines and drives up costs even further.
The availability of parts is also a constraint. While a conventional sedan might draw from a deep inventory of standard replacement components, EV parts can face longer lead times — particularly for newer models. Insurers price that uncertainty into the premium.
Stop overpaying for insurance. Compare 20+ quotes on Rates.ca and potentially save $500+ on auto insurance.
Must Read
- Warren Buffett used these 4 solid, repeatable money rules to turn $9,800 into a $150B fortune. Here’s how to apply them to your own life
- Stop the leak: 5 costs Canadians (still) overpay for every single month. How many are sabotaging your 2026 budget?
- This 7-step plan from Dave Ramsey is designed to help you ditch debt, save more, and build wealth — here’s how it works
Join 19,000+ readers and get Money.ca’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Battery damage: The coverage gap most EV owners don't know about
The EV battery pack is the most expensive single component in the vehicle — often valued between $7,500 to $25,000 or more depending on the model (3). What many owners don't realize is that battery replacement coverage is not uniformly included in standard comprehensive auto insurance policies.
Some insurers treat partial battery damage or degradation differently from total loss. In practical terms, a flood event, a severe impact or even a thermal incident can trigger a battery replacement claim that falls into a grey zone between what's covered and what isn't. EV owners should ask their insurer directly: Does the policy cover full battery replacement cost, and under what conditions?
Home charging equipment adds another variable. Standard homeowner or tenant policies may not automatically cover a level 2 charging unit installed in a garage. Some auto insurers offer riders that extend coverage to charging infrastructure, while others omit this coverage by default (4).
Which insurers have the most competitive EV rates in Canada
Premium variance for EVs is considerably wider than for gas vehicles. Two drivers with identical profiles — same age, same postal code, same driving record — can receive EV quotes that differ by several hundred dollars annually, depending on the insurer. That gap exists because not all insurers have built actuarial models with enough EV claims history to price confidently. According to analysis by the Insurance Institute, some carriers, particularly smaller regional carriers, have responded by pricing conservatively, which means pricing high.
The market for EV insurance is still maturing. Competition is expected to increase as EV penetration grows and claims data accumulates but that trend has not yet produced consistent pricing across the market.
Advertisement
The practical implication is that EV drivers need a strategy for keeping insurance and maintenance costs manageable. To help, here are four steps to securing the best policy rates:
- Get an EV insurance quote before you buy — not after. The premium difference is material to the ownership math and should inform your decision, not follow it
- Ask specifically about battery replacement coverage. Confirm whether your policy covers full replacement cost and under what conditions — flood, thermal event, partial damage
- Check whether home charging equipment is covered under your existing policy or requires a separate rider. Not all insurers include it automatically
- Compare at least three insurers specifically on EV coverage. Pricing variance is wider than for gas vehicles and smaller regional carriers often price more conservatively
Read more: Here are the 3 net worth milestones that change everything for Canadians (and what they say about you)
Total cost of EV ownership: What dealers aren't showing you
Federal and provincial EV incentives are designed to reduce the purchase price gap between electric and gas vehicles. But incentives are just a one-off bonus. Insurance is an annual cost.
Take, for example, this hypothetical scenario: a driver who receives a $5,000 purchase incentive but pays an additional $900 more each year in insurance, compared to a gas-powered vehicle. In six years, the savings gained from getting an EV vehicle are wiped out, making the EV a more expensive proposition in the long-term. If insurance costs rise further as battery replacement claims increase, the payback calculation shifts again.
The more useful question isn't whether an EV saves money on fuel — it usually does. The question is whether the total cost of ownership, including insurance, adds up to significant savings overall.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Surex Insurance (1); Mitchell International Canada (2); ExpertZoom (3); TD Insurance (4)
You May Also Like
- Here’s how to retire in 10 short years no matter where you live in Canada — even if you’re starting with $0 savings
- Here are the 3 essential moves to make once you’ve saved $50,000
- Here are 6 simple ways to avoid the stress of living paycheque to paycheque, according to Suze Orman
- Your daily coffee habit isn't the problem. Prioritize these 4 critical investments instead and watch your net worth skyrocket
Sandra MacGregor has been writing about finance and travel for nearly a decade. Her work has appeared in a variety of publications like the New York Times, the UK Telegraph, the Washington Post, Forbes.com and the Toronto Star.
Credit Cards • May 01
Merchant category codes in Canada
Managing Money • Mar 25
