Electric Vehicles: How to Navigate Heightened Risks and Insurance Challenges

SEPTEMBER 3, 2024

As electric vehicles (EVs) and charging stations become more prevalent, organizations that use them face increasing risks. News headlines about EV fires, which can be especially dangerous and hard to extinguish due to the vehicles’ lithium-ion batteries, are common. Because the technology is relatively new, its dangers and related safety measures are still evolving — as are the insurance considerations for property owners and other organizations.

Further complicating this issue are various laws and regulations that require organizations to install a certain number of charging stations for EVs. These regulations are often driven by national, state, or local governments that aim to promote the adoption of EVs and support the necessary infrastructure. However, insurance coverage for EVs can sometimes present challenges that seemingly contradict these efforts. Carriers may perceive EV charging stations as a significant fire risk and charge higher premiums, require special safety measures, and deny or limit coverage.

To help you navigate these challenges, USI has compiled resources that merge industry standards with actionable guidance. These tools can help you effectively manage the complexities and emerging risks of these modern vehicles:

• Parking Structures: Updates to Fire Safety Standards
• Fire Sprinklers: Design Classifications
• Modern Vehicle Parking and EV Charging Areas: Protection Controls
• Preparations for Emergency Response

Impact on Insurance Coverage and Costs

Due to the perceived increase in risks associated with EVs, insurance companies might impose the following:

• Limited coverage — Insurers might restrict or limit coverage for properties with EV charging stations, either excluding them from policies or offering only limited protection.
• Higher premiums — To mitigate the perceived risks, insurance companies may charge higher premiums for properties that install EV charging stations. This can significantly increase an organization’s operational costs.
• Special conditions — Insurers may impose specific conditions or require additional safety measures, such as enhanced fire suppression systems, which can further increase costs.

Organizations and their insurance brokers should collaborate with carriers to assess both current and future protective measures for modern vehicle-related risks to maintain the continuity of their insurance programs. This process ensures that all safety controls receive proper credit and comply with the unique underwriting standards of each carrier.