The adoption of electric vehicles (EVs) is rapidly increasing in India. Factors such as rising fuel prices, government subsidies, and growing environmental awareness have made EVs a strong option for consumers. However, a significant concern arises for potential EV buyers: the cost of insurance.
People often express, “Hey! The car is affordable, or reasonably priced after subsidies, but the insurance is much higher than that of a petrol or diesel car!” This is a valid question. Let’s explore the reasons behind the higher insurance costs for EVs and the factors contributing to it.
Car insurance costs depend on several factors, including engine capacity, the car model, and how the car is used, so there’s no fixed amount. Third-party insurance can start from ₹2,000, while comprehensive policies may cost ₹10,000 to ₹20,000 or even more.
EV insurance is determined based on your car’s kilowatt (kW) capacity, which can cost ₹1,780 to ₹6,712 per year or even more for longer terms (for example, ₹5,543 to ₹20,907). Additionally, the make and model of the car also influence insurance rates.
The battery is the core component of any EV. Currently, an electric car’s battery constitutes approximately 30% to 40% of its total cost. If the battery is damaged in an accident, the replacement cost can run into lakhs of rupees.
For example, if an EV battery needs replacement, the cost can range from ₹4 to ₹6 lakh, whereas engine repairs in a petrol car are not that expensive. This is why insurance companies perceive a higher risk and increase the premium.
EVs in India are still a new technology. Their parts are not readily available everywhere, unlike petrol and diesel cars.
If an electric car’s fender, control module, or battery pack gets damaged, the cost of ordering parts and repairs is high.
Moreover, the number of dealerships and service centers is limited, which further increases repair costs.
Companies increase premiums to cover these additional expenses.
EVs often come with advanced features, such as ADAS (Advanced Driver Assistance Systems), smart connectivity, digital displays, and automatic braking systems.
While these features make the car modern and safe, their repair costs are extremely high.
If sensors are damaged even in a minor accident, the bill can be in lakhs rather than thousands.
Insurance companies must consider this risk.
In recent years, there have been instances of EV batteries catching fire. Although companies are continuously working on battery safety, this remains a significant risk for insurance providers.
Events like battery failure or fires can necessitate the replacement of the entire vehicle.
Additionally, EV repairs require special training and tools that are not easily accessible everywhere.
Therefore, insurance costs increase along with the risk factor.
The resale value of petrol and diesel cars in the second-hand market is easily determined. However, it’s still unclear how much EVs will be worth after 5 to 6 years.
Questions always linger about the battery’s lifespan.
If the battery’s performance declines, the vehicle’s value can decrease significantly.
Insurance companies, therefore, set higher premiums to protect themselves.
Even with government subsidies, the initial cost of EVs is higher than that of petrol-diesel cars.
A more expensive car means more expensive insurance.
Companies determine premiums based on the on-road price of the car, and since EVs are more expensive, the premiums naturally increase.
EVs are still a new market in India. Insurance companies have very limited data on their performance, maintenance costs, and long-term damage.
When companies lack clear data, they increase premiums to cover the risk, acting as a kind of safety net.
Although EV insurance is expensive, the good news is that premiums will gradually decrease as the EV market expands.
The government is also considering tax breaks on insurance to promote green mobility.
Additionally, battery technology will become cheaper and safer, reducing repair costs.
As the EV network and demand grow in the coming years, insurance will become more affordable.
