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
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!