As a power output unit, Induction Motor (IM) is widely used in Electric Vehicles (EV) due to its unique advantages of higher power density and better torque ability. With more complicated motor controller system, there are some hardware and software failures which bring some risks including EV unexpected acceleration or deceleration, therefore it is necessary to build high-accuracy torque estimation and safety control strategy. Firstly, hazard and safety concept are analyzed to make sure function safety goals and levels for IM system. Secondly, a novel method of high-accuracy torque estimation is proposed based on a rotor dynamic and composite flux linkage observer. Then, fault diagnosis and handling mechanisms of motor torque are designed to avoid hazards when it is a significant difference between motor estimation torque and vehicle requested torque. Finally, power test and Hardware in Loop (HIL) bench are configured to verify torque estimation accuracy and fault protection mechanisms rationality by comparing test results and injecting related faults. Experiment result shows that motor torque accuracy is within ±5 Nm and fault protection mechanisms can bring motor to safety state promptly.