Will 20% ethanol blending with petrol impact your car insurance premium?

insurance premiums are linked to factors like claims history, vehicle type, and location—not fuel type

With the government’s push towards greener alternatives, India is steadily moving toward E20 fuel—a mix of 20% ethanol and 80% petrol. This shift aims to cut emissions and reduce dependence on fossil fuels. However, vehicle owners are asking an important question: Can this transition lead to higher motor insurance premiums, especially for older vehicles?

According to experts, the answer is no—at least for now.

“E20-compliant engines are designed to operate on fuel containing up to 20 percent ethanol and 80 percent gasoline, a significant step toward cleaner energy use and enhanced environmental sustainability,” says Subhasish Mazumder, head, motor distribution at Bajaj Allianz General Insurance.

He emphasises that insurance premiums are linked to factors like claims history, vehicle type, and location—not fuel type. “At present, there is no conclusive evidence to suggest that the use of E20 fuel significantly increases or decreases these risk factors. Hence, motor insurance premiums remain unaffected for vehicles using E20 or conventional fuel.”

Paras Pasricha, head of motor insurance at Policybazaar, agrees. “E20 fuel has been tested extensively for compatibility with modern vehicles. Studies indicate that ethanol has no adverse effect on metal or metal-coated engine components, which are common in most vehicles. As long as the vehicle is E20-compliant, which is increasingly the case for newer models, there should be no impact on the engine’s integrity."

Pasricha adds, “The introduction or use of E20 fuel is unlikely to cause a rise in insurance premiums, especially if the vehicle is certified for it by the manufacturer.”

Ethanol is slightly more corrosive than lower-blend fuels, but Mazumder notes that such effects typically appear only after 10–15 years of use. Therefore, insurers are not currently adjusting risk assessments or premiums based on E20 usage.

Vehicles manufactured in earlier standards like BS-IV models, were not engineered to handle ethanol’s corrosive properties, its tendency to absorb water, or its lower energy output compared to regular petrol. As a result, instances of engine performance issues and starting difficulties have been debatable.

However, both experts highlight the importance of the engine protection cover, an add-on that protects against damage caused by water ingress—particularly relevant during floods. Pasricha says, “While E20 fuel itself may not directly harm the engine, any issues arising from fuel contamination, improper refueling, or moisture ingress could lead to damage that is not covered under a standard motor policy.”

He adds that if a vehicle suffers damage due to fuel-related issues—such as moisture in ethanol-blended fuel or compatibility problems in older engines—the engine protection add-on could cover repairs or replacement, depending on the policy terms.

For now, E20 fuel does not seem to impact motor insurance premiums. What matters more is whether your car is E20-compliant and whether you have opted for crucial add-ons like engine protection and fuel adulteration coverage. As Mazumder notes, focusing on proper maintenance and add-ons is the smarter way to protect your car in this evolving fuel landscape.