What's Return To Invoice (RTI) Cover In Car Insurance (Complete Guide)

A car insurance is essential in order to drive your vehicle in India. The Cars Act, 1988 mandates a 3rd party policy on every car that is running on Indian roads. Though the 3rd party policy fulfils the legal requirement, it has a limited scope of coverage. It does not cover the damages suffered by the car itself which also incurs considerable financial costs. This is where an extensive car insurance policy makes the picture. An extensive car insurance provides an inclusive scope of cover which provides coverage for both third party legal liabilities along with the damages suffered through the car itself. Moreover, car insurance plans also provide optional add-ons which help in enhancing the scope of coverage further. One such add-on, offered by an extensive car insurance policy, is Return to Invoice Cover. Let’s know very well what go back to invoice is –

What is Return to Invoice cover?

Return to invoice cover is an add-on cover which boosts the claim payable underneath the car insurance plan when the car is stolen or maybe it's damaged beyond repair. Underneath the cover, in the event of constructive total loss or theft from the car, the invoice worth of the vehicle is paid as claimed. Thus, the return to invoice cover bridges the main difference between your Insured Declared Value of the car insurance policy and the invoice value of the car and pays a greater claim to policyholders.

How does return to invoice insurance work?

When you purchase a car insurance policy and select the go back to invoice cover using the basic comprehensive cover, the add-on becomes effective. Thereafter, in case your car suffers a constructive total loss where it's beyond repairs or if the car is stolen, the invoice value of the car pays as claimed.

Return to invoice vis-à-vis Insured Declared Value

After you buy a car, its value starts depreciating as it ages. Thus, under a car insurance policy, the policy limit of the policy is calculated after considering the depreciated worth of the car. The policy degree of a car insurance policy is called the Insured Declared Value and it's calculated as the ex-showroom price of the car less depreciation. The ex-showroom cost of the car does not range from the registration charges and road tax that you simply pay on the car. Moreover, with every passing year, the rate of depreciation around the car increases and the IDV reduces. In the event of total loss or theft of the car, the applicable IDV is paid as a claim quite less than the actual price paid for buying the car.

Invoice value of the vehicle, however, is calculated with the addition of the ex-showroom cost of the vehicle, registration charges and the road tax paid. In other words, it's the on-road price of the vehicle less insurance cost. The invoice worth of the vehicle is, therefore, greater than the IDV from the car insurance policy. If you select the return to invoice cover and the car is completely damaged or stolen, you get the invoice worth of the vehicle and not the IDV and thus you receive a higher claim in your car insurance.

Comparison of a car insurance policy with return to invoice cover and without

The afore-mentioned difference between coming back to invoice cover and IDV can be better explained with an example. Let’s think that an automobile insurance policy is bought on the new car where the IDV is INR 5 lakhs and also the invoice worth of the car is INR 7 lakhs. Here’s the way the policy would differ if the return to invoice cover is availed in one instance and if the cover is excluded in the other –

Benefits of return to invoice insurance cover

Choosing the go back to invoice cover being an add-on with your car insurance policy is beneficial due to the following reasons –

1. Better scope of coverage 

   If you opt for the go back to invoice cover, you get a better scope of coverage in your car insurance policy.

2. Higher claim payment

   In case of total lack of the vehicle or theft, you get the invoice value of the vehicle paid as claim. This value includes the registration charges paid along with the road tax thereby enhancing the claim amount you get.

3. Beneficial in case of high-end cars

   If you buy your dream luxury car after saving for it for several years, total loss or theft of the car will be a considerable financial loss. Though your vehicle insurance plan would compensate you for that loss suffered, the IDV paid could be considerably lower than the price of the vehicle. In such cases, having a go back to invoice cover is a blessing. The cover would pay you the invoice value of the car that is much higher than the IDV thereby lowering your financial loss and enabling you to switch the damaged luxury car with a new one.

Applicability of return to invoice add-on

Here are some instances wherein you are able to choose to buy the go back to invoice add-on and where the add-on would work –

1. The go back to invoice add-on would be readily available for cars that are as much as 5 years old. Some insurance companies restrict the policy for cars up to 3 years old too. So, compare the accessible auto insurance plans to get the maximum age of the car for which the go back to invoice add-on is allowed through the insurance company.
2. The go back to invoice cover works only in the event of theft of the car
3. If the car suffers total constructive loss that is beyond repair, the go back to invoice add-on could be applicable. The car can be damaged in a fire, natural calamity or man-made calamities or accidents.

Non-applicability of return to invoice cover

The return to invoice add-on would not operate in the following situations –

1. If your car is 5 years old, the add-on wouldn't be available
2. If a person suffers an incomplete damage which may be repaired, the return to invoice cover wouldn't be applicable
3. If the automobile is stolen however, you don’t file a police FIR, the claim wouldn't be admissible. In such cases, the go back to invoice add-on would not be applicable
4. If you suffer a third party claim, return to invoice add-on wouldn't be applicable

Return to invoice vis-à-vis zero depreciation 

When it comes to choosing add-ons, a car insurance plan supplies a range of add-ons to choose from. Aside from the go back to invoice add-on, one other popular add-on may be the zero depreciation cover that also improves the claim payable by nullifying the effect of depreciation around the areas of the car. While both return to invoice and zero depreciation are popular add-ons which boost the scope of coverage, they're not the same as each other. So, let’s understand the similarities and differences between these two add-ons –

1. Similarities between return to invoice and zero depreciation add-on
   • Both add-ons boost the claim amount 
   • Both add-ons can be found on cars as much as 5 years old
   • Both add-ons require an additional premium
2. Differences between return to invoice and zero depreciation add-on

   The differences between return to invoice and zero depreciation add-ons could be understood in the following table –

   Return to invoice add-on	Zero depreciation add-on
   It is applicable in the event of total loss or theft of the car	It does apply in the event of damages suffered through the car that are repairable
   The add-on bridges the space between the invoice worth of the vehicle and also the IDV of the car insurance policy	The add-on bridges the space between the actual price of a car’s part and it is depreciated value

Cost of return to invoice add-on

Being an optional add-on, the return to invoice cover comes at an additional premium. The particular cost of availing the add-on depends on the insurance company and it is pricing policy. However, generally, the go back to invoice add-on involves one more premium of 10%. Which means that when the basic car insurance policy costs INR 100 without the return to invoice add-on, by choosing the go back to invoice add-on you might be required to pay INR 110.

Who should select return to invoice?

The return to invoice add-on ought to be chosen by individuals who –

1. Have bought an expensive car and cannot bear the loss in case of theft or total lack of the car
2. Live within an area where car thefts are common
3. Have bought a new car and wish a complete protection on it
4. Live in an area where damages to the car could be severe. For example, in earthquake prone areas, the car can be damaged severely
5. Use their cars frequently for very long commutes and, therefore, face a greater possibility of accidents

The return to invoice insurance policy is a valuable addition to your vehicle insurance plan if you have committed to a fresh car. At a small additional premium you will get comprehensive cover your car which may compensate you for that price of purchasing the car in case your car is damaged beyond repairs or is stolen.

Frequently Asked Questions

1. How is IDV calculated?

   IDV is calculated by deducting the marketplace value of the vehicle with depreciation in line with the car’s age. The rate of depreciation is really as follows –

   Age of the car	Applicable depreciation
   Up to six months	5%
   More than Six months but as much as one year	15%
   More than a single year but as much as 2 years	20%
   More than 24 months but as much as 3 years	30%
   More than Three years but as much as 4 years	40%
   More than 4 years but up to 5 years	50%

   For cars aged Five years and above, the IDV is decided mutually between your insurance company and also the policyholder.

2. If I add accessories towards the car, would their value be covered underneath the return to invoice cover?

   No, the value of additional accessories isn't covered underneath the go back to invoice add-on. Only the invoice worth of the car could be covered which excludes the value of accessories.

3. Are other add-ons available if the return to invoice add-on continues to be selected?

   Yes, you can opt for as numerous add-ons as you want despite deciding on the go back to invoice add-on.

4. What may be the coverage amount of return to invoice?

   The return to invoice add-on is applicable for twelve months. After the year is finished, you would have to pick the add-on again when renewing the insurance policy.

5. I am buying third party coverage for my car as I make use of the car sparingly. Can one purchase the return to invoice add-on using the policy?

   No, go back to invoice cover is available only with comprehensive car insurance plans. If you are buying merely a third party liability policy, you would not get the go back to invoice add-on by using it.