Finance & Loans

3 Reasons Why Electric Car Insurance Is Expensive

Given the consistent rise in environmental issues and global calls to curb the carbon emissions that contribute to global warming, many people are now switching to electric cars. Though many diesel cars offer great fuel efficiency, electric cars are a much better alternative to address the impact of carbon emissions and pollution on the environment.

But did you know that electric cars, though very eco-friendly, are also quite expensive as compared to fuel-run cars? As a result of their higher cost, their car insurance is also bound to be expensive.

Let’s look at some of the reasons why electric vehicle insurance is costlier than four wheeler insurance for their fuel-run counterparts.

What Makes Electric Car Insurance Expensive?

A lot of factors are responsible for the high four wheeler insurance price for electric cars. Here are some of the main reasons you should consider whilst purchasing insurance for your electric car.

  • The high cost of the parts of electric cars

Electric cars do not have as many moving parts as diesel or petrol-run cars. However, just like the engine of a fuel car is the most important and expensive part of the vehicle, electric cars run on lithium-ion batteries, which are quite expensive. It would be safe to say that these batteries constitute nearly 50% of the car’s cost.

Such a crucial part of the car naturally has an impact on electric car insurance. This is one of the reasons why the insurance premiums of electric cars are high. Though a lot of electric car manufacturers are making an effort to bring down the price of the aforementioned batteries, this move could take some time, following which the electric car insurance rates can also be expected to come down.

  • Electric car batteries need frequent replacements

Electric car batteries do not last forever; they have an expiry date after which they start malfunctioning or simply stop working. You can only imagine how inconvenient it would be if you weren’t aware of this and your electric vehicle gave up on you in the middle of a busy road or when you were in a hurry.

As a result of their limited shelf life, lithium-ion batteries need to be replaced from time to time. However, since these batteries are quite expensive, replacing them can be heavy on your pocket. While the best insurance for electric cars can cover a variety of damages and adequately protect you from any financial losses, their premiums are expensive as well.

  • The availability of fewer mechanics for electric cars

It is not easy to repair an electric vehicle since they have fewer but specialised and complex components. Moreover, since electric vehicles are comparatively newer in the market than petrol, diesel, or CNG-run vehicles, there are not many mechanics who have the skill and the expertise required to repair a damaged electric car.

As an owner of an electric car, you will have to shell out more money to have your car repaired properly in case of damage. Similarly, the car insurance premium prices will also be higher since the plan has to cover the repairs of your electric car.

Electric Car Insurance Rates and the Growth of the EV Market

According to a report, the Indian electric vehicle market was worth USD 5 billion in 2020 and is forecast to expand to USD 47 billion by 2026 at a CAGR of more than 44% between 2021-2026. However, the electric vehicle market in the country is still in its nascent stages.

However, had it not been for the COVID-19 pandemic and the resultant lockdowns and restrictions, the manufacturing and supply chain of electric vehicles would have performed much better. Furthermore, given the recent policies and initiatives by the Government of India, the market is likely to show significant growth in the next few years.

A third-party car insurance policy, be it for a fuel-run car or an electric vehicle, is mandatory as per the laws prevailing in India. Hence it is important to know the car insurance rates fixed by the Insurance Regulatory and Development Authority of India (IRDAI) which offers a 15% discount on third-party motor insurance for electric vehicles to encourage their usage.

Capacity of the battery Premium per year (₹) Premium for 3 years (₹)
Below 30KW 1,761 4,493
Above 30KW and below 65KW 2,738 8,104
Above 65KW 6,707 20,659

Getting a suitable car insurance policy for your electric car, though expensive, is easy. All you need to do is find a reliable car insurance provider and get an appropriate quote for your car insurance policy online. The same goes for renewing your electric car insurance policy. The Tata AIG four wheeler insurance renewal, for example, offers a simple and hassle-free renewal process online to keep you worry-free when it comes to protecting your car from damages.

Conclusion

It is common knowledge that in the present day, electric cars, their parts, and their insurance costs are quite high. However, with time, the price of electric vehicles will come down and so will the electric car insurance rates, at least to some extent. However, the high costs of insurance plans for electric vehicles should not discourage you from owning a car insurance policy, which is absolutely essential for your car.

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