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Green Car Insurance: What Is It and How Does It Help the Environment?

Published April 5, 2024

This article has been reviewed by licensed insurance industry expert, Moshe Fishman on 4/5/2024.

If you’re driving an eco-friendly car or plan to in the near future, you might consider green auto insurance. But there are other reasons to think about green coverage. For example, if you choose to reduce the miles you drive, or use more sustainable transportation options like car-sharing or park and ride. So, if you’re hearing about this type of insurance for the first time, this article will provide useful information about what it offers and how it helps to protect the environment.

As you know, there are different types of auto insurance. Green car insurance is yet another type of coverage that typically applies to electric or hybrid vehicles. There are varying types of green auto coverage, and the rates can vary depending on your car, coverage amounts, and other factors. But the advantages of this insurance go beyond the individual car owner by helping our environment.

By offering green insurance, a small part of insurers’ profits may go to “offset some of the carbon footprint made by automobiles.”  For example, they may use a fraction of your premium to donate to organizations dedicated to planting trees in rainforests.

But drivers are also rewarded with discounts by some insurance companies for their purchase of a green car and/or driving less. Shopping around for the best coverage and rates for your fuel-efficient car is typically the same as gasoline-operated cars. Ideally, it’s best to compare as many insurers and options as possible.

Types of Green Car Insurance

Green auto insurance can take several forms depending on the insurance provider. With the increased popularity of cars that are eco-friendly, it makes sense that green car insurance is also on the rise. By purchasing green coverage, you can help improve your own ecological footprint and save you money. Let’s review some of the eco-friendly types of insurance.

Electric/hybrid car coverage

You’ve made a conscious decision to purchase a green vehicle that is designed to be more sustainable and reduce carbon emissions. Hybrid cars reduce the need for gasoline, allowing you to drive further distances on a tank of gas while electric cars eliminate gasoline dependency altogether.

Although the insurance coverages are similar to traditional auto policies, there are some additional coverages that address differences in your vehicle’s operation. For example, parts and repairs for electric vehicles are generally higher. There may also be battery coverages and power cable risks.

Usage based auto insurance

If you're a mindful driver who drives safely and drives less, usage-based auto insurance can offer lower premiums. According to the United States Environmental Protection Agency, driving less helps to reduce pollution. To take advantage of this type of policy, your driving will be tracked through a device that is plugged into your car. Or you may be tracked via your smartphone or through GPS technology.

Driving less also reduces wear and tear on your car as well as the potential for auto-related accidents. A similar type of insurance that may work for you may be pay-per-mile insurance. But be sure to track your mileage first to be sure it’s a good fit.

Electric/hybrid replacement coverage

If you are driving a gas-powered vehicle, you may consider getting green replacement coverage to help confirm your decision to want to protect the environment. This optional insurance will cover costs for a comparable eco-friendly car if your current vehicle is totaled in an accident.

Car sharing coverage

Some insurance companies now offer car sharing coverage that includes liability and property damage if you damage the vehicle or are involved in an accident. Car sharing is similar to renting a car but is usually member based and is typically for short-term usage. It allows drivers to use vehicles by the hour or on a daily basis and only pay for time and miles driven.

The Benefits of Green Auto Insurance

Driving an eco-friendly car is the best way to help reduce gas emissions. These fuel-efficient vehicles include electric, plug-in hybrids, hydrogen, and cleaner-burning gasoline vehicles. Green insurance provides coverages for these vehicles and other eco-friendly options to help reduce fossil fuel and its effect on climate change and the environment. The beauty of this coverage is that it not only benefits the environment, but also provides advantages to consumers as well as the insurance companies. Here are some noteworthy advantages:

For the environment

It takes all of us to make a real difference in protecting our world. Driving a hybrid vehicle is a good start in reducing carbon emissions. By owning a fuel-efficient car, you become energy independent, reduce fuel costs, lower emissions and environmental impact, and reduce vehicle maintenance.

To help in this movement, insurance companies offer “green” insurance incentives for eco-friendly cars that operate with alternative energy resources. Of course, this type of coverage may cost more due to the higher cost of repair and replacement costs. However, insurance companies help to benefit the environment by purchasing carbon offsets or donating a fraction of profits to environmental causes.

For consumers

Green insurance can offer potential discounts for drivers who own an eco-friendly vehicle, which helps the overall effort to reduce fuel exhaust. Depending on the insurance company, you may even benefit from lower rates. For example, usage-based coverage for your vehicle can lower your premium. In addition, there are other discounts like alternative fuel discounts if you use cleaner burning fuel like hydrogen, biodiesel, natural gas, or ethanol. In addition, suggests researching government programs “that offer rebates or tax credits” for owning an electric vehicle.

If you are still looking for ways to save the planet and your money, try opting for other modes of transportation, public options, carpooling, and other ways to reduce your mileage and insurance. You can also opt for paperless billing that may get you a discount with some insurers.

Do You Need Green Car Insurance?

If you are wondering if you need green insurance and don’t yet own an eco-friendly vehicle, it may be wise to consider green insurance options. Look at your current vehicle and situation to determine what insurance coverages may be best to meet your needs and your budget.

On the other hand, if you own an electric or hybrid vehicle, you should consider a green auto insurance policy. Start with your current insurance company for their offerings. You should also shop around to find providers who offer this coverage.


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