In this article, I will explain Return to Invoice cover of the car insurance policy. A comprehensive car insurance policy safeguards you from third-party liabilities, own damage, and theft of the car. But this policy is not sufficient for everything.
If you have the basic comprehensive policy then you get your claim according to the insured declared value (IDV). Insurance companies offer some add-ons to enhance the value of comprehensive insurance policies. Return to Invoice is also one of the important add-on covers for Car insurance. Especially for those people who are buying a new vehicle or have a 1 or 2-year-old car.
Return to Invoice cover basically fulfill the gap between the purchase price and insured declared value (IDV). By adding this cover, you increase the coverage in the policy and you get the entire claim amount in case of theft or Total Loss.
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What is Return to Invoice (RTI)?
Return to Invoice is an add-on cover that you can add to your comprehensive policy by paying an additional premium. Your regular policy doesn’t cover the value beyond the insured declared value.
By adding this cover, you get the complete reimbursement of your car purchase price or you can say if your car is stolen or damaged beyond repair (more than 75%) then you get the entire invoice price of your car.
In the case of RTI companies pay claims in the following ways:
The invoice value of the vehicle (Ex-Showroom Price + the Road Tax + Registration Charge)
Or
The Vehicle Replacement Value (Ex-Showroom + the Road Tax + Registration Charge)
or
Ex-Showroom Price + Additional percentage
Normally, registration charges are given according to the initial original purchase bill. There are some companies that provide you with vehicle replacement value.
Premium for RTI
Do you need to pay any additional amount for RTI coverage? The answer is yes. This is additional which you can add to the comprehensive policy by paying an extra premium.
It cost you approximately 10% more than the basic premium. It may vary from company to company. Assume three segments of the car.
| Basic Premium | Premium with RTI |
| Rs. 10000 | Rs. 11000 |
| Rs. 15000 | Rs. 16500 |
| Rs. 20000 | Rs. 22000 |
What is the Importance of Return to Invoice Cover?
With the help of the below example, you can understand the importance of Return to Invoice Cover. Suppose Mr. Srivastava purchases two cars on the same date with the same purchase price.
He purchased a comprehensive policy for one car and for another vehicle he took a Comprehensive policy with RTI. Let’s see what will be the difference in a claim if his car gets stolen or Total constructive Loss.
| Normal Comprehensive Policy | Comprehensive Policy with RTI |
| New Car Purchase Price = Rs. 40 Lac | New Car Purchase Price = Rs. 40 lac |
| Two years later, IDV = Rs. 28 lac (Depreciation at 30%) | After two years, IDV = 28 Lac (Depreciation at 30%) |
| Car Stolen or Total Constructive Loss | Car is stolen or total constructive Loss |
| In This case, the claim will be paid according to IDV | In this case, the claim will be paid according to the purchase price |
As you see above the normal comprehensive policy does not provide complete reimbursement of the car and claim paid as per the current IDV.
However, in case of having an add-on of Return to Invoice cover, Mr. Srivastava gets the full claim amount and that is the purchase price.
Who Should Buy Return to Invoice?
This is a very important add-on cover and ideally, everyone should take this. However, it is not available after a certain vintage of the vehicle. This is highly advisable for those who purchase a new car.
Following are some situations where RTI should be taken:
- Luxury and Expensive car owner
- New Car
- If residing in a risk-prone area
- Don’t have proper parking and park the car randomly
- Inexperience driver or New driver
- Who travels long distances on a regular basis?
- If you have a high use of your car
In the above case the chance of risk is high that’s why RTI is recommended. For example, if the car driver is very new and inexperienced then the chance of damage to the car may be high.
If you have a luxury car then the loss amount will be high and it will be a high financial loss if your car is stolen or gets total damage.
If you are residing in an area where the risk of theft or damage is high then also it can be a very useful add-on. In the same way, if proper parking is not available and you park your car randomly then the chance of theft will increase. In highly risky situations opting for RTI may be a very useful cover.
Does RTI Applicable for Partial Loss?
This is a very important point which you should be clear about. Return to Invoice cover is not applicable in case of small damage or partial loss. If your car gets damaged partially or small dent etc then your claim will be processed according to IDV.
If you have opted for zero depreciation add then the depreciation factor will not be countable. It is advisable to take a zero depreciation add-on if your vehicle is less than 5 years old.
Return to Invoice vs Zero Depreciation
Let’s understand what is the difference between a Zero depreciation policy and a return to Invoice. Zero depreciation policy pays you the claimed maximum up to the IDV without any depreciation. However, RTI covers the road tax and registration charges also.
RTI is basically a bridge between the Insured declared Value and the Invoice Value of the car. Let’s see this table:
| A policy with Zero Depreciation | A policy with Return to Invoice |
| Applicable in Partial Loss, Total Loss, Total Constructive Loss | Applicable only in case of Total Loss and Total Constructive Loss |
| Claim = According to IDV without depreciation factors | Claim = Invoice Value including the Road tax and Registration Charges |
In case of a claim in RTI add-on, some insurance companies may also pay the premium of a comprehensive insurance policy for the new vehicle.
What are the Car Age Criteria to Get an RTI?
RTI is available only to the specific age limit of the car. You cannot purchase this add-on cover for any age of vehicle. Most companies offer a return to Invoice cover up to three years old car only.
Some also offer up to 5 years. After that, this option is not available because, after this age of the car, there is significant wear and tear in the vehicle. The company may face losses if they will provide above the specific age limit.
Conclusion – Return to Invoice Cover
Return to invoice cover is an important add-on cover in an insurance policy. If your budget allows, you should take this additional coverage. There are several insurance companies like Digit, Reliance, etc which provide RTI coverage.
