Return To Invoice Cover

You must be aware that when you buy a car, its value starts depreciating as soon as you take it out of the showroom. The percentage of this depreciation may seem small at the beginning, but it increases each subsequent year.

This is a crucial aspect when it comes to the insurance of your car. The insurer will cover your vehicle according to its IDV (Insured Declared Value), i.e., the current market value of the car. So, even if your car is stolen or damaged beyond repair, you will be compensated with the depreciated amount and not the price you bought it for originally.

For instance, Aman bought a brand new Honda City for Rs 14 lakhs. The value of the car began depreciating the moment he took it out of the showroom. The car was stolen within the first year of the purchase. Let’s assume it gets depreciated by 15% within the first year.

So, the depreciation amount = 15% of 14 lakhs = Rs.2,10,000

The compensation he is eligible to get from the insurer = Manufacturer's listed selling price - depreciation

=Rs.14,00,000 - Rs.2,10,000

=Rs.11,90,000

So Aman will receive Rs. 11,90,000 from the insurer. And, if Aman plans on buying a new car of the same model, you will have to bear the price difference!

However, there is a workaround for this unfortunate situation. Car insurance plans can be customised with an add-on called Return to Invoice Cover.

So, what is a Return to Invoice Cover? What are its benefits? How do you calculate it?

Let’s have a look!

What Is Return To Invoice Cover?

A Return to Invoice (RTI) cover is essentially an add-on that allows you to get the invoice amount of the car, i.e., its original amount in case of any total loss, constructive total loss, or theft of the car - without factoring in the depreciation amount. Here are some features of the RTI Cover-

It is an add-on available with comprehensive insurance plans, and you are required to pay an additional premium if you want to add it to your policy.

It can be purchased by new car owners. It is available for vehicles that are less than 3-5 years old.

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Why Should You Buy A Return To Invoice Cover?

If you own a comprehensive insurance plan, and your car gets stolen or damaged beyond repair, the insurer will compensate you with the IDV. An RTI Cover helps you negate this by cancelling out the depreciation, thereby making you eligible to receive the invoice amount for the car.

You should consider adding a Return to Invoice Cover in your insurance plan if-

You live in an area which is prone to thefts or you feel insecure.

You own a luxury vehicle that is priced on the higher side.

You live in a hilly area, or an area where floods or accidents occur often.

Return To Invoice Cover Calculation

When you buy a new car, you pay the ‘on-road price’ of the vehicle. This also includes the showroom price of the vehicle, along with registration charges, insurance charges, and road tax charges.

Let’s see what happens if you own a comprehensive insurance plan without an RTI cover and with an RTI cover.

  • Comprehensive Insurance Plan Without RTI Cover

    If your car is stolen or damaged beyond repair, the compensation will be determined by the IDV.

  • Comprehensive Insurance Plan With RTI Cover

    If your vehicle is damaged beyond repair or stolen, the compensation will be equal to the original value of the car, which depends on the following two values-

    Vehicle Price = Ex-Showroom Price + Road Tax + Registration Charges (at the time of the original purchase).

    Current Replacement Price of the vehicle = Ex-Showroom Price + Road Tax + the Registration Charges (in case the same model is available).

Let’s take Aman’s example again. If he had added the RTI Cover to his car insurance policy, he would be eligible to receive the invoice value of the car as the compensation from the insurer. This means that he would receive Rs 14 lakhs as the compensation.

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Are There Any Exclusions To The Return To Invoice Cover?

The RTI Cover will not be applicable in the following cases-

Third Party Liability

In case your vehicle causes any sort of damage to a third person or their property, you cannot claim under the RTI Cover as it covers only own damages.

Old Vehicles

As mentioned before, the RTI Cover can be purchased for vehicles that are less than 3-5 years old. You will not be given the RTI add-on option after a certain number of policy renewals.

Non-Filing Of FIR

If your vehicle has been stolen and damaged, it is necessary to file an FIR at the nearest police station and also submit a copy of the FIR to the insurer. Not complying with these steps will make you ineligible to make a claim under the RTI Cover.

Minor Damages

If your vehicle has sustained minor damages and can be repaired, you cannot claim under the RTI Cover.

So, we hope this article helped you understand about Return to Invoice Cover is. This add-on is especially beneficial if you own an expensive car or live in a locality that is relatively unsafe - so that you are protected from any heavy financial losses and stress.

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