EV insurance: Ensure all-round protection for battery with add-on cover

Return-to-invoice, zero depreciation for major components are must-haves

Electric Vehicles (EVs) are fast gaining popularity. While they still account for only a small percentage of total automobile sales, their sales volumes are growing rapidly with each passing year. Customers must understand the nuances of EV insurance and ensure that their vehicles enjoy comprehensive protection.

Similarities and differences

There are a few similarities between the insurance covers available for internal combustion engine (ICE) vehicles and EVs. Third-party cover is compulsory for both. EV buyers should also ideally complement it with a standalone own damage cover, or buy a comprehensive cover (which includes both third-party and own damage cover).

Insurance for EVs is usually costlier. 

“The price of an EV is usually higher than that of a comparable ICE vehicle, so the insurance premium is also about 10 to 20 per cent higher,” says Animesh Das, chief underwriting officer, Acko Insurance.

Customers may need to buy a few add-on covers to safeguard their EVs. The battery, for instance, must be comprehensively covered. “The battery contributes almost 60 per cent of the vehicle cost. Any major damage to the battery may involve replacing it completely as repair may not always be possible,” says Mayur Kacholiya, head–motor product and actuarial, Digit General Insurance.

Many people buy their own charging stations. “These are not normally covered in the main motor vehicle policy and must be additionally insured,” says Kapil Mehta, co-founder, SecureNow.

Cover the battery 

The manufacturer typically offers a warranty at the time of purchase. One can also buy an extended warranty for another year or two. “In case of an EV, if something goes wrong with the battery, the cost burden is almost akin to purchasing a new vehicle, hence one should buy the extended warranty offered by the manufacturer, at least for the battery,” says Das.

In addition, one should also purchase an add-on cover for the battery. “If there is no external issue and yet your battery stops working or its performance reduces, those issues will be covered by the battery warranty. But if there is a sudden power surge due to which the battery stops working, or the battery catches fire, the battery add-on cover will come in handy in those circumstances,” says Das.

According to Parthanil Ghosh, president-retail business, HDFC ERGO General Insurance, “The battery, charger and accessories should be covered even while the parts are detached from the vehicle. Furthermore, zero depreciation should apply at the time of claim settlement (including to the electric motor).”

Buy right IDV

As the EV grows older, make sure that it has the right insurance declared value (or IDV, the sum insured in a motor vehicle policy). “At present, the rate at which the value of an EV should depreciate each year is not clear,” says Mehta. Das suggests applying the thumb rule of 10 per cent depreciation each year.

Buy these add-ons

Experts suggest buying a return-to-invoice add-on. “Even if your vehicle is stolen or damaged completely, you will get its original price, which may be higher than the IDV, as compensation,” says Mehta.
 

Ghosh suggests buying an electric motor cover. “It covers damage to the propulsion motor along with internal parts of the insured vehicle arising out of water ingression and/or leakage of oil or grease,” he says. 

Kacholiya suggests that the EV add-on cover should come with roadside assistance services that EVs require, such as help with charging the battery, towing the vehicle to the nearest charging station, mobile generators, etc.

Ghosh adds that the policy should offer coverage for regular updates and replacements so that there is coverage for the latest features. The insurance policy, according to him, should also offer incentives or discounts, considering the eco-friendly nature of EVs, and should leverage any incentives offered by the government. NCB Protection is another useful add-on, according to Ghosh. “It protects the No Claim Bonus (NCB) even if a claim is made during the policy period,” he says.

Critical considerations for EV insurance buyers
 

The coverage and exclusions of EV add-on covers may differ from one insurer to another, so read the policy document and understand both what is covered and what is excluded  
 

In particular, understand battery-related exclusions: your claim could be denied if you fail to maintain battery health or don’t charge it according to the manufacturer’s guidelines
 

Understand if there are limitations on the number of claims
 

Avoid repairs from unauthorised places or without the insurer’s prior approval
 

Be transparent about modifications made to your EV; failure to do so can lead to claim denial