Tricky aspects of insuring electric vehicles
【Summary】The rapid growth of electric vehicles (EVs) in India has led to the development of EV-specific insurance policies. Insuring EVs can be tricky due to factors such as the high cost of the battery and electric motor, the need to insure the charging setup, and the unique operational risks. The cost of insuring an EV is generally higher compared to an internal combustion engine (ICE) vehicle. Comprehensive insurance, including coverage for theft, fire, and natural calamities, is recommended.
Electric vehicles (EVs) have become increasingly common on Indian roads, with their sales accounting for 6% of all sales, up from 1% in 2019. This rapid growth is evident in the significant increase in unit sales, from around 2 lakh units in 2019 to 13 lakh units sold in 2023. As the festive season approaches, we can expect to see even more electric vehicles on the road.
The insurance options for EVs are still in their early stages, and the industry is working on designing policies that address the unique aspects of these vehicles. Companies like HDFC Ergo, Bajaj Allianz, Royal Sundaram, and Magma HDI insurance offer EV-specific policies and additional battery secure add-ons for private cars.
Compared to internal combustion engine (ICE) vehicles, the cost of an EV is primarily driven by the battery and electric motor. Insuring the external charging set-up is also crucial. Additionally, EV insurance takes into account factors such as improper charging stations, voltage fluctuations, and other mishaps that can significantly damage the vehicle. Roadside assistance is particularly important for EVs, as they can easily find themselves out of charging-point range.
The cost of insuring an EV is typically higher than that of an ICE vehicle. While there is a 15% discount on EV vehicle insurance, the premium for EV insurance remains higher due to the higher cost of the vehicle itself, as well as the higher replacement, maintenance, and labor costs associated with the infant EV industry.
When it comes to insurance coverage, a comprehensive or own damage insurance policy is recommended in addition to the mandatory third-party insurance. Own damage coverage includes protection against theft, fire, and natural calamities, while comprehensive coverage also includes services like legal cover for third-party damage and personal accident covers. Roadside assistance and cashless claim processing may be enhanced in comprehensive coverage, which is particularly important for EVs due to the risks associated with the battery pack, manual charging, and electric motor.
Some insurance policies also include roadside assistance for breakdowns, energy issues, or accidents. Given that EVs have a range of 300 to 400 km on a well-charged drive, the chances of getting stuck without a charging station nearby are higher. In such cases, insurer assistance becomes crucial. Comprehensive EV insurance can provide breakdown services in select cities.
In addition to regular add-ons, separate battery covers and motor covers are available in most policies to address the critical component risks. The battery cover includes protection for the charger and battery, while mechanical and electrical breakdowns are covered as well. However, insurance does not cover surges and voltage fluctuations resulting from the use of non-OEM supplied materials for charging or other purposes. Similarly, motor cover protects against water ingress and any damages caused by manufacturer faults, recalls, or warranty period issues are not covered.
While the current motor insurance product range is generally suitable for ICE engines, an EV insurance policy tailored to the specific differences of EVs can provide better coverage for EV owners in terms of battery and performance risks.
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