E20 fuel and insurance claims: Can insurers reject your claim?

Before you assume that filling up with E20 is a reason for claim rejection, it’s important to understand what current regulations, insurers, and automobile manufacturers say, as the Indian Government mandates the sale of E20 fuel (a blend of 20% ethanol and 80% petrol) effective from April 1, 2026. 

Posts claiming that using E20 fuel might lead to the rejection of motor insurance claims have been all over social media recently. However, the government has dismissed these claims as false. In a fact check, the Press Information Bureau (PIB) clarified that the use of E20 fuel does not invalidate a vehicle’s motor insurance policy or lead to the rejection of insurance claims. The government has also advised citizens not to rely on unverified social media posts and to verify such information through official sources before acting on it.

ICICI Lombard has clarified that the use of E20 fuel does not affect the validity of a motor insurance policy. The insurer said it does not consider the use of E20 fuel in older vehicles as negligence and will not reject claims solely on that basis. Claims continue to be assessed based on insured events such as accidents, theft, and other covered risks, irrespective of whether the vehicle uses petrol, diesel, CNG, or E20 fuel.

Several owners have also recently posted on social media that the use of E20 fuel has damaged the engine of their vehicle. However, this claim is misleading. According to a study by the Automotive Research Association of India (ARAI), E20 fuel did not cause any issues related to engine performance, drivability, cold startability, or the compatibility of metal and plastic components in vehicles designed to use it. 

The findings indicate that E20 is scientifically tested, performance-validated, and developed to support India’s transition towards cleaner, ethanol-blended fuels; however, some rubber parts may require replacement in older vehicles in time.

Oil Minister Hardeep Singh Puri has also recently dismissed social media claims that E20 petrol damages vehicle engines, calling them a misinterpretation. He said there is no evidence that E20 harms compatible vehicles, and both automobile manufacturers and service providers have reported no issues with its use.

Here’s everything you need to know about E20 fuel and whether it can impact your motor insurance claim.

E20 fuel and insurance: Know your rights

Using E20 fuel does not invalidate your car insurance policy. Insurance claims are assessed based on policy terms, exclusions, and the cause of loss, not simply on whether a vehicle was fueled with E20. If the vehicle owner has a comprehensive car insurance policy, their coverage remains unchanged and continues to protect against accidents, theft, fire, flood and cyclone damage, third-party liabilities, and total loss.

“Many people/vehicle owners assume that any damage to the engine is covered under insurance. That’s not always true. Motor insurance is designed to cover sudden and accidental damage, not normal wear and tear or mechanical breakdowns,” commented Paras Pasricha, Business Head-Motor Insurance, Policybazaar. 

Standard car insurance policies typically do not cover any mechanical breakdowns, electrical failures, consequential damage or wear & tear and depreciation.

Insurance claims are decided by policy terms and the cause of loss – not by whether the vehicle uses E20 fuel. Vehicle owners should continue to follow their manufacturer’s recommendations for proper maintenance, particularly for older vehicles that may not be designed for E20 fuel.

Under what circumstances can the use of the wrong fuel become a valid reason for claim repudiation?

Motor insurance is designed to cover sudden and accidental damage, not normal wear and tear or mechanical breakdowns. Standard car insurance policies typically do not cover: mechanical breakdowns, electrical failures, consequential damage, wear & tear and depreciation.

“One add-on worth understanding is engine protection cover, which may help cover certain engine-related damages such as water ingress, hydrostatic lock, or lubricating oil leakage following an insured event, subject to policy terms. But, fuel-related wear and tear, gradual deterioration, or mechanical damage is typically not covered under this add-on,” said Paras Pasricha.

Insurance claims are decided by policy terms and the cause of loss – not by whether the vehicle uses the wrong fuel.

According to Sachin Joshi, President- Claims, Operations and Customer Service, Liberty General Insurance, the use of the wrong fuel can become a valid basis for repudiation when it is established that:

•  The damage was directly caused by the fuel used and the same is under exclusion of the insurance policy wordings.

•  The owner acted negligently or ignored manufacturer guidance while using E20 fuel.

•  The vehicle was knowingly used with a fuel it was not designed to handle.

Vehicle owners should also note that a one-time accidental misfuelling is typically viewed very differently from repeated use of incompatible fuel. A single mistake may be treated as an accidental event, whereas repeated use suggests disregard of known limitations and may be seen as negligence, which weakens the claim.

E20 fuel in older cars: Know the risks

It can affect the manufacturer’s warranty if specifically mentioned in the owner’s manual.

If a vehicle is not designed for E20 and damage occurs because of prolonged use, the warranty may be denied. 

That said, warranty rejection does not automatically mean an insurance claim will also be rejected. 

However, it can indirectly affect the claim if the insurer argues that the damage resulted from improper use or failure to follow manufacturer specifications.

Tips for older car owners

According to Sachin Joshi, owners of older vehicles should:

Check whether their vehicle is E20-compatible,

Refer to the manufacturer’s guidance.

Watch for signs such as reduced performance, rough idling, or warning lights,

Seek prompt inspection if any fuel-related issues arise.

If in doubt, they should confirm compatibility with the dealer or manufacturer before regular use.

Word of caution

The biggest misconception is that E20 fuel is incompatible with old vehicles; to avoid any future challenge in vehicle performance and the claim process, the owner should refer to the manufacturer’s manual and act accordingly.

Motor insurance does not automatically become void because E20 fuel was used.

Claims are assessed based on the cause of loss, the policy terms and exclusions, expert inspection findings, and whether the damage resulted from an insured peril or from mechanical failure or gradual deterioration.

Disclaimer: This article is for informational purposes only and should not be construed as legal, insurance, financial, or automotive advice. Motor insurance claim decisions depend on the terms and conditions of the policy, the cause of loss, the insurer’s assessment, and the facts of each case. Vehicle owners should refer to their insurance policy documents and the manufacturer’s recommendations regarding E20 fuel compatibility. In case of doubt, consult your insurer, vehicle manufacturer, or an authorised dealer.