Rising fuel prices have made driving personal vehicles costly, getting people to look for cheaper alternatives. In such a scenario, electric vehicles (EVs) have emerged as a feasible option due to their low running costs and the added bonus of a negligible carbon footprint. This economical option can run up to 300 km (or more, depending on the model) when fully charged, at a lower running cost compared to fossil-fuel cars.
However, be it an EV or a conventional car, it is imperative to protect yourself financially against any damages arising from the vehicle.
Protecting the costliest part of an EV—the batteries
EV owners can buy the same insurance products available for petrol or diesel cars also known as internal combustion engine (ICE) cars. The insurance will offer financial protection to everything an EV owner requires including the high-voltage lithium-ion EV batteries that are the most important and expensive part of the vehicle. These batteries are non-repairable and need to be replaced as a whole assembly in case of any form of physical damage. However, most manufacturers offer a five- to eight-year warranty on their batteries. Additionally, EV batteries are generally maintenance-free and last between eight and ten years before requiring a replacement. And even if you need a battery change after eight years, it will be covered in your comprehensive motor insurance.
Also read: General insurers see growth in EV insurance demand, but safety concerns could push up premiums
Knowing the nitty-gritty of the basics is the key
A car insurance policy has two most essential components— third-party and own-damage cover. Third-party insurance is a mandatory cover that financially protects you against death, bodily injury and/or property damage of a third party caused by traffic accidents or even high-voltage EV batteries catching fire. While the own-damage cover is not a compulsory component, it financially safeguards you against damages caused to your own car due to accidents, flooding and other such external impacts.
For instance, if your EV catches fire while the battery is charging, the damage from the fire will be covered under the own-damage policy if you use the EV manufacturer’s charger or an original equipment manufacturer (OEM)-approved charger. The damage will not be covered if you use a charger from non-OEMs. Knowing these details along with exclusions and inclusions of your motor insurance features is crucial to understand if the policy is apt for your EV.
The premium conundrum
Motor policy premiums for EVs are in the same bracket as ICE cars. However, the ministry of road transport and highways increased the third-party premium rate for various categories of ICE vehicles from June 1, while EV owners continue to enjoy a 15 percent discount on third-party premium rate. The premium for own-damage cover, nonetheless, is determined by factors like insured declared value (IDV) and the geolocation of your car.
Insuring the value of EV
The cost of an EV is comparatively higher than ICE cars. Therefore, it is critical to decide on the correct IDV of your car that will financially protect you in the event of a total loss to your car. The IDV is the maximum amount set by you and will be reimbursed by your insurer if your EV is damaged beyond repair or is stolen. While higher IDV signifies a slightly higher premium, lowering the IDV below the market value of your vehicle means that it increases liability, resulting in lower reimbursement from the insurer. Setting the correct IDV will go a long way in protecting your EV.
For additional coverage, depending upon your budget and EV requirement, you can opt for add-ons such as nil depreciation cover, return-to-invoice cover, EMI protection cover, no claim bonus cover and consumables protection cover. As EV parts are relatively costlier than ICE cars, taking appropriate add-ons would be beneficial in the long term.
India's EV market is still nascent but steadily gaining momentum. They are noiseless, easy to drive and require minimum maintenance. From the insurance perspective, apart from EVs enjoying a 15 percent discount on third-party premium rates, there are not many major differences between EVs and ICE cars. EVs, however, relieve us from worrying about increasing fuel prices, and are more environmentally friendly. Now that you know the nitty-gritty of insurance for electric vehicles, decide on your next car based on your requirements.
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