Why Are Electric Cars Expensive to Insure?

To know why electric vehicles are expensive, one must know how they work. EVs are made of three crucial elements: electric motor, transmission, and battery pack. The battery pack is the most expensive of the three components as it is important for storing energy. Because these batteries use lithium-ion technology (comprising rare earth materials), the cost of manufacturing increases. For larger vehicles, this is even costlier. So, the battery is the simple reason why electric cars are expensive.

Now that we know why electric cars are expensive, let's understand the reason behind the higher cost of car insurance for electric vehicles.

EVs offer the dual benefit of being cheaper to maintain while also being better for the environment as compared to their fuel-run counterparts. However, if you undertake general research to understand how much does it cost to insure an electric car vs a conventional car, you will realise that the former is more expensive. The electric car insurance rates are higher because EVs are more expensive than conventional cars, they may have a greater susceptibility to damage, and their costs for repairs are also higher.

However, buyers need not be discouraged as car makers are constantly innovating to help reduce the cost of EVs. As the cost of ownership and maintenance of EVs decreases, it will subsequently lower the electric vehicle insurance. Although this is a possibility in the near future, EV owners are still advised to buy car insurance early on, so they don’t have to worry about miscellaneous costs. Comprehensive motor insurance will not only help pay for third-party liability but will also cover own damage.

Here are some pertinent factors influencing the premium payable for electric vehicle insurance for car:

The High Cost of EVs: One of the most prominent reasons why the car insurance for electric vehicles is higher is because EVs themselves are more expensive when compared to their fuel-run counterparts. EVs are sophisticatedly designed for a smooth driving experience which increases the cost of manufacturing. By association, this leads to a higher premium payable for car insurance for electric cars.

Expensive Spare Parts: Although there are fewer parts needed in the making of an EV as compared to a traditional vehicle, the battery of an EV is very expensive. If there is a time when your battery needs any repairing or replacement, this becomes an expensive job which is another reason why electric vehicle insurance tends to be higher.

Higher Probability of Battery Replacement: Since the battery carries the major load of powering the EV, it comes with a pre-disclosed expiry date. This means that EV owners may have to replace their car’s battery from time to time, causing a rise in the premium payable for motor insurance for EVs.

Limited Mechanic Expertise: As EVs are relatively new in the market, their repairs and general servicing require highly skilled mechanics. This limited talent pool means that the repairs would be costlier. This trickles down to the cost of EV insurance for cars.

Motor Insurance Cost for EVs: To encourage the purchase of EVs, the Insurance Regulatory and Development Authority of India (IRDAI) mandated a fixed premium on third-party insurance for EVs. As per the IRDAI mandate, third-party EV insurance for cars will be offered at a 15% discount to boost sales. For those wondering how much does it cost to insure an electric car, here are the policy rates, which are determined as per the battery capacity of the EV:

However, the table above only applies to third-party motor insurance. The premium amount for a comprehensive car policy would differ from one insurance provider to the next.

When you seek insurance for your EV, the insurance provider will ask you to share some details about the vehicle. Usually, the insurance process for both EVs and regular cars is the same. Here are some vehicle details that insurance providers commonly ask:

• The model of your EV
• The year in which your vehicle was manufactured
• The contact information of the insurance seeker, and
• Whether the vehicle will be used for commercial or personal purposes

In addition to the aforementioned, you might also be asked about your former insurance policy and other specifications such as the location, etc.

The best car insurance for electric vehicles does not mean that you have to buy the most expensive policy. Here are some tips that will help you buy car insurance for cheaper:

Get Insurance Online : If you buy car insurance online, you will be able to find the best car insurance for electric vehicles because you can easily compare policies. Insurance providers favour online customers because they believe that the mortality risk in the customers who buy policies online is lesser than those who purchase insurance offline. Tata AIG also enables hassle-free car insurance renewal online to enhance convenience for buyers.

Use the No Claim Bonus (NCB): Insurance companies reward insurance holders that have not made any claims during the term period with a discount on the premium. As this NCB accumulates, your discount on premiums increases.

Invest in Anti-Theft Device : Protecting your EV with an anti-theft can also contribute to reducing the premium amount.

Electric Vehicles are becoming increasingly popular amongst buyers and for all the right reasons. Not only do EVs help save the cost of fuel, but they are also comparatively better for the environment.

With continued innovation in the automobile industry, the cost of purchasing, owning, and maintaining EVs is bound to reduce over time. However, it is prudent to invest in comprehensive insurance for cars to protect your beloved electric vehicle from any unpleasant scenario on the road.