Tricky insurance for electric vehicles
【Summary】Summary: Insuring electric vehicles (EVs) can be tricky due to the unique aspects of these vehicles. The cost of insuring an EV is typically higher compared to internal combustion engine (ICE) vehicles. Comprehensive insurance is recommended, with coverage for theft, fire, natural calamities, and third-party damage. Roadside assistance is essential for EVs due to limited charging infrastructure. Additional add-ons for battery and motor coverage address critical risks.
Electric vehicles (EVs) have become increasingly common on Indian roads, with sales accounting for 6% of all vehicle sales, up from 1% in 2019. The rapid growth of the EV market is evident, with 13 lakh units sold in 2023 so far, compared to around 2 lakh unit sales in 2019. As the festive season approaches, we can expect to see even more electric vehicles on the road.
The insurance options for EVs and the industry's response to these vehicles are still in the early stages. Insurance companies such as HDFC Ergo, Bajaj Allianz, Royal Sundaram, and Magma HDI offer EV-specific policies. These policies are designed to address the unique aspects of EVs, and Magma HDI even offers battery secure add-ons for private cars.
Compared to internal combustion engine (ICE) vehicles, the cost of EVs is mainly tied up in the battery and electric motor. The external charging set-up is also crucial to insure. Operational factors for EVs differ from those of ICE vehicles. EV insurance not only covers drunk driving but also looks for improper charging stations, voltage fluctuations, and other mishaps that can significantly damage the vehicle. Roadside assistance for EVs takes on a new meaning, as these vehicles can easily find themselves out of charging-point range.
The cost of insuring an EV is typically higher than insuring an ICE vehicle. While there is a 15% discount on EV vehicle insurance, the overall cost is still higher due to the higher cost of the vehicle itself. Replacement costs, maintenance costs, and labor charges are also higher for the emerging EV industry. Additionally, it may be challenging to execute repairs or maintenance on EVs in the first place.
A comprehensive or own damage insurance policy, in addition to the mandatory third-party insurance, is recommended for EV owners. Own damage insurance covers theft, fire, and natural calamities, while comprehensive cover includes additional services such as legal cover for third-party damage and personal accident coverage. Roadside assistance and cashless claim processing may also be enhanced in comprehensive cover. These features are particularly important for EVs due to the risks associated with the battery pack, manual charging, and electric motor.
Some policies include roadside assistance for breakdowns, energy issues, or accidents. As EVs have a range of 300 to 400 km on a well-charged battery, the chances of getting stuck without access to a charging station are high. Insurer assistance, therefore, becomes a crucial tool for EV owners, especially in select cities where comprehensive insurance covers breakdowns.
In addition to regular add-ons, separate add-ons such as battery covers and motor covers address critical component risks in most policies. The battery cover includes protection for the charger and the battery itself, covering mechanical and electrical breakdowns, which are the primary risks from a cost standpoint in an EV. 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 that could damage any component. Manufacturer faults, recall damages, and damages within the warranty period are also not covered by insurance. Therefore, it is important to have EV insurance tailored to the specific differences and risks associated with these vehicles.
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