Tricky nature of electric vehicle insurance
【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 the unique aspects of these vehicles, such as the high cost of batteries and charging setup. Insurance coverage includes damage from theft, fire, and natural calamities, as well as roadside assistance. However, the cost of insuring an EV is typically higher than that of a traditional internal combustion engine vehicle.
Electric vehicles (EVs) are becoming increasingly common on Indian roads, with their sales accounting for 6% of all sales, up from 1% in 2019. The growth has been rapid, with 13 lakh units sold in 2023 so far, compared to around 2 lakh units in 2019. 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, with insurers making small but incremental changes to policies to address the unique aspects of these vehicles. Companies like HDFC Ergo, Bajaj Allianz, Royal Sundaram, and Magma HDI insurance offer EV-specific policies and add-ons to ensure the battery and other components are covered.
Compared to internal combustion engine (ICE) vehicles, the cost of insuring an EV is typically higher. The bulk of the cost of an EV is in the battery and electric motor, making it crucial to insure these components. EV insurance also takes into account operational factors such as charging station issues and voltage fluctuations. Roadside assistance for EVs is particularly important, as these vehicles can easily find themselves out of charging-point range.
Inclusions in EV insurance policies usually include comprehensive or own damage insurance, which covers theft, fire, and natural calamities. Additional services like legal cover for third-party damage and personal accident covers are also included. Roadside assistance and cashless claim processing may be enhanced in comprehensive cover. These features gain heightened risk application in EVs due to the battery pack, manual charging, and electric motor.
EVs have a range of 300 to 400 km on a well-charged long drive. However, unless the charging infrastructure significantly improves, there is a higher chance of getting stuck, making insurer assistance crucial. Some policies also include breakdown, energy, or accident assistance.
In addition to regular add-ons, separate add-ons for battery covers and motor covers address the critical risks associated with these components. The battery cover includes the charger and the battery, while mechanical and electrical breakdowns are covered. However, insurance does not cover surges and voltage fluctuations caused by using non-OEM supplied materials for charging or other purposes. Motor cover protects against water ingress and any damages caused by manufacturer faults, recalls, or warranty period issues.
While the current range of motor insurance products suits ICE engines, there is a need for EV insurance tailored to the specific differences and risks associated with these vehicles. Such insurance can benefit EV owners from both a battery and performance standpoint.
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