Planning an EV car as your next? The insurance is more expensive than ICE vehicles

• Electric vehicle (EV) insurance is different from insurance for the traditional internal combustion engine (ICE) vehicles in several ways.
  
• EV insurance is comparatively more expensive than insurance for ICE vehicles.
  
• The add-ons that you choose will depend on your individual needs and budget.
  

Electric vehicles are where the auto industry is headed. They may cost a bit more initially, but over a longer period can lead to cost savings as compared to vehicles which run on petrol or diesel. The insurance for these vehicles also differs from their diesel/petrol run counterparts. We take a look.

Electric vehicle insurance is different from insurance for internal combustion engine vehicles in a few key ways.

Cost: EV insurance is comparatively more expensive than insurance for ICE vehicles. “This is because EVs are more expensive to repair, and there is less data available on the risks associated with insuring them,” says Sanjiv Bajaj, chairman and MD, BajajCapital.

Coverage: EV insurance policies typically cover the same things as insurance for ICE vehicles, such as third-party liability, comprehensive, and collision coverage.

EV insurance frequently includes coverage for the battery. “Since the battery is an important and costly component of an EV, insurance policies may include coverage for degradation or damage to it,” says Animesh Das, chief underwriting officer, ACKO.

Charging equipment coverage: Charging equipment coverage is another important consideration for EV owners. “If your charging equipment is stolen or damaged, you will need to make sure that your insurance policy covers it,” says Bajaj.

Roadside assistance: Roadside assistance is another important coverage to consider for EV owners. If your EV breaks down, you will need to be able to get it towed to a service station. Your EV may even run out of charge in a worst case scenario, and may need to be towed away. Some EV insurance policies include roadside assistance as part of their standard coverage, while others may offer it as an add-on.

EV insurance is more expensive

Electric vehicles are built with advanced technology that is expensive. “Furthermore, the EVs' light weight and instant torque make them vulnerable to extensive damage. This increases the insurer's liability, resulting in higher insurance policy costs,” says Das.

“The battery typically constitutes 50%-60% of the vehicle cost and currently most original equipment manufacturers (OEMs) import batteries, further making the vehicle costlier,” says Mayur Kacholiya, head, motor product, Digit insurance.

Also, EV vehicles are relatively new in the market, and stable trends relating to the risks associated with the same are only emerging. Battery cost is high, and any damage to battery may result in higher claims outflow (equivalent to total loss of the vehicle). “The servicing or repairs also requires intervention of highly qualified specialised mechanics, making the labour cost for EVs higher. All these factors, among others, affect the premium price of an electric vehicle,” says Kacholiya.

For own damage (OD), final premium would be higher for EV mainly due to higher vehicle cost. However, the third-party premium, which is tariffed and decided by the regulator, is 15% lower. Below example illustrates the premium for Revotron XZ Plus EV vs ICE.

Details	EV XZ PLUS LUX (in Rs)	1.2 Revotron XZ Plus DT (O) (in Rs)
Ex-Showroom	16,80,000	11,20,000
Cost after subsidy (Cost to customer)	14,28,000	11,20,000
IDV	16,80,000	11,20,000
Tariff OD Premium	55,104	36,736
Less: Discount (considered 70% for 4W)	38,573	25,715
Total: OD Premium after Discount	16,531	11,021
Add-On (Zero Dep: 0.45%)	7,560	5,040
Overall OD Premium	24,091	16,061
Third-Party Premium (3-Year compulsory)	9,044	10,640
CPA Premium (Rs 15 lakh SI)	375	375
Overall Premium (exclusive of GST)	33,510	27,076
Premium to Ex-Showroom	1.99%	2.42%

Source: Go Digit General Insurance
Assumptions: Assumed same discount rate and only Zero Depreciation add-on is opted.
Note: Premium prices only for illustrative purposes. Actual rates may vary.

Keep in mind when insuring your EV

Add-ons offered for EV vehicles may vary from insurer to insurer. “As components of an EV vehicle are different, there may be specific add-ons one might have to take due to varied risks,” says Kacholiya.

For example, water ingression, or short circuit, or damages due to external means like rat bite or animal attack, etc. can damage the battery of the vehicle or the electrical panel of vehicle charging point, or vehicle charger including the cable. One can check with their insurer if they offer any specific add-ons related to EVs to cover these additional risks as well.

“The add-ons that you choose will depend on your individual needs and budget. If you are concerned about the cost of repairing, or replacing your EV's battery, you may want to consider purchasing a battery cover. If you frequently drive long distances, you may want to consider purchasing roadside assistance,” says Bajaj.

It is important to understand all what is covered and be aware of the exclusions before buying EV insurance.