Those that know Elon Musk’s boundless ambitions and energy should not be surprised by Tesla’s most recent announcement. The company just rolled out Tesla Insurance Services. Several months ago, there were hints that the renegade CEO of Tesla might offer customers in-house auto insurance but gave no specific roll-out date. Now that plan is finally taking shape.
Just a week ago the company made the announcement, stating “beginning today, we are launching Tesla car insurance. It will be very competitively priced coverage for Tesla owners.” Customers can expect rates to be 20% to 30% lower than third party insurers like Allstate and Liberty Mutual. That is a huge difference that is undoubtedly going to draw considerable interest from current owners.
Why is Tesla Selling Car Insurance?
Tesla vehicles are quite expensive and so is insuring them. A brand-new Model “S” starts at $75,000. If you want a new Model X, it will set you back $81,000, and that’s not including major upgrades that can add on tens of thousands more to the sticker price. For a top of the line Tesla, you could end up spending north of $100,000. The vehicle price is not the only expensive thing. So is the auto insurance coverage. According to the popular comparison website, AllianceInsurance.net Tesla owners pay some of the highest national auto insurance rates. On average, Tesla cars cost about $2,460 per year to insure. That is roughly $1,360 more than the national U.S. average, which is about $1,100 annually.
The cost of insuring a Tesla varies a lot by model. For example, the Model 3 averages only about $1,900 per year. Next is the Model X, which is nearly $2,500 annually. The Tesla Model “S” is just under $3,000 per year. That averages out to a whopping $250 per month. Tesla executives believe the high cost of auto insurance is one reason why many people refrain from purchasing them. Offering Tesla insurance is one more incentive to drive sales and hopefully keeping customers upgrading to new models. If the company is able to save owners 25% or more, this could mean savings of $600 or more each year. It is a gamble the company is willing to risk.
Why are Tesla’s so Expensive to Insure?
There are numerous reasons why Tesla cars cost so much to insure. Here are just a few of the main reasons:
- They are new vehicles that do not have a long track record for insurers to assess long-term risk
- Tesla’s are very costly
- Tesla’s are very expensive to repair and replace
- They are considered luxury vehicles
- The large batteries have exploded several times raising serious safety concerns
How to Save on Tesla Car Insurance
While many owners will pay over $2,000 each year for insuring their Tesla, others will pay a lot less. Here are some tips on getting cheap Tesla car insurance.
- Buy a Model 3, which is cheaper to insure
- Have a high deductible of $1,000 or more
- Garage your Tesla
- Have and maintain good credit
- Get every discount you can
Insurance is a complicated business that requires special licensing. At the moment, Tesla auto insurance is only licensed in California. This is not a bad state to start out in. Not only does California have the most Teslas, but it almost has a cult-like following in the sunshine state. The company backing Tesla will be State National Insurance. This is according to filings at the California Dept. of Insurance. Tesla also intends to offer benefits that most insurers don’t offer Tesla owners.
The Three Ways Tesla Hopes to Offer Cheaper Coverage
Insurance is an extremely competitive market. There are hundreds of national and regional carriers. Tesla needs to separate itself from big competitors like State Farm and Progressive. It has a three-pronged approach to gain customers. This includes:
- Lowering the repair cost by routing vehicles to Tesla service centers
- Reducing commissions usually paid to insurers
- Giving a big discount for autopilot miles
One of the main reasons why Tesla’s cost so much to insure is the high repair cost. Many Tesla parts are very expensive, and many technicians are not as familiar with repairing these complex vehicles. Tesla wants to bring repairs, resulting from most accidents, in-house. This will drastically reduce what it typically costs for repairs, minor or significant. This control over repairs will significantly reduce collision and comprehensive insurance costs.
Will Tesla Automobile Insurance Takeoff?
By now, after starting three successful companies, no one should ever doubt the entrepreneurial talents of the one and only Elon Musk. The billionaire has been so successful for so many years, that some people think he’s an alien from another planet. If his prior success has any bearing on the future, Elon will turn Tesla Insurance Services into a large, successful subsidiary for its popular electric vehicles. The only question is, how fast will it happen?