Year-End 2025: How EVs, Add-Ons And PAYD Reshaped Motor Insurance

In 2025, Indian consumers began treating motor insurance as a financial protection tool rather than just a legal requirement. Buyers are increasingly focused on better coverage, personalisation and value for money.

Data from Policybazaar shows that customers are choosing insurance plans that match their driving habits and vehicle usage instead of opting for minimum cover.

EVs Become A Major Growth Driver

Electric vehicles emerged as the fastest-growing segment in motor insurance. Once considered a niche category, EVs now need specialised cover due to battery protection requirements and higher repair costs.

New EV insurance purchases grew nearly 2.5 times year-on-year, while premiums jumped around 200%. In comparison, petrol and diesel vehicles saw less than 10% growth in policy purchases and about 30% growth in premiums.

Protection-First Buying Gains Momentum

There was a clear shift towards stronger protection in 2025. Buyers increasingly added optional covers to strengthen their insurance.

Roadside assistance was chosen by 74% of customers, while 60% opted for zero depreciation cover. Around 25% selected add-ons such as engine protector, consumables, and key or lock replacement. Return to invoice (RTI) remained limited at 12%.

New Vehicles See Higher Add-On Adoption

Add-on selection was even higher for new vehicles. Zero depreciation cover was chosen by 96% of new car buyers, followed by roadside assistance at 83%. Consumables (74%), RTI (67%) and engine protector (61%) also saw strong demand.

This shows that buyers prefer comprehensive cover during the early years of vehicle ownership.

SUVs Lead Demand Across States

SUVs and compact utility vehicles dominated new car insurance purchases. Popular models included Tata Nexon, Mahindra XUV 3XO, Mahindra XUV700, Hyundai Creta and Tata Punch.

State-wise, Maharashtra recorded the highest demand for motor insurance in 2025, followed by Uttar Pradesh and Delhi.

Pay-As-You-Drive Gains Wider Acceptance

Usage-based insurance became more mainstream during the year. Around 15–20% of customers opted for pay-as-you-drive policies, usually declaring annual usage of 7,500–8,500 km.

These customers saved nearly 25–30% compared to standard comprehensive policies, making PAYD plans attractive for urban and low-mileage drivers.

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Conclusion

By the end of 2025, motor insurance in India had evolved into a more personalised and value-driven product. Growth in EVs, wider add-on adoption and usage-based plans signal a clear move towards smarter and need-based insurance choices.

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