“Insurance is half price when Tesla self-driving is activated, because it increases safety so much,” says Elon Musk

U.S. insurance firm Lemonade shocked the auto and insurtech world this week by announcing a 50% reduction in insurance premiums for Tesla vehicles when the automaker’s Full Self-Driving (FSD) system is engaged. Tesla CEO Elon Musk publicly backed the move.

“Insurance is half price when Tesla self-driving is activated, because it increases safety so much,” Musk wrote on X.

The new offering, dubbed “Lemonade Autonomous Car insurance,” will initially roll out in Arizona on January 26 and in Oregon in February, with plans to expand into other states thereafter.

“Tesla owners insured with Lemonade who use FSD can save up to 50% on their insurance rates when the system is engaged, as it is 7x safer than a human driver,” said Nic Cruz Patane, who is involved with Tesla's Autopilot team.

It is one of the first major insurance products explicitly tailored to autonomous driving usage.

“Teslas driven with FSD are involved in far fewer accidents,” said Lemonade co-founder Shai Wininger, explaining that the insurer’s models now analyse millions of signals from the car’s onboard systems to price risk more accurately.

As a result, drivers will see per-mile rates cut in half when FSD is actively steering.

Elon Musk took to X to endorse the strategy, supporting Lemonade’s contention that FSD’s advanced sensors and artificial-intelligence-driven decision-making enhance safety compared with traditional human driving, and making the case that such improvements should be reflected in lower insurance costs.

Insurance is half price when Tesla self-driving is activated, because it increases safety so much https://t.co/0aBO99Pgns

— Elon Musk (@elonmusk) January 21, 2026

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How does this help motorists when Tesla already offers own insurance?

Tesla already offers its own insurance with a smaller discount, typically around 10 % for drivers who use FSD more than half of the time.

But Lemonade’s steep rate reduction represents a bold bet on autonomous technology that can reshape how motorists are insured. 

The announcement comes as the broader insurance industry contemplates how to assess risk in an era of increasing partial autonomy.

Traditional liability frameworks and pricing models have struggled to keep pace with the rapid deployment of driver-assistance systems, even as regulators continue to scrutinise their real-world performance.

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