What is Return to Invoice (RTI) cover in Car insurance?
Return to invoice cover is an add-on available under the own damage section of the car insurance policy. The issue with comprehensive car insurance is that it doesn’t cover the depreciation in case of total damage of the car. In a total loss scenario, if you have a comprehensive insurance the Insured Declared Value (IDV) will be paid to you. This claim amount would not be sufficient to purchase another car.
The Return to Invoice add-on covers the gap between the IDV and the invoice value of the car along with the registration charges and other applicable road taxes.
Return to invoice add-on helps in fetching the invoice price of the car at the time of total loss or constructive total loss.
RTI Claim Amount = (Ex-showroom price + Registration Charges + Road Tax) = On-Road Price
Let us understand the each and every term associated with the Return to invoice option:
- Insured Declared Value: Insured declared value is the value of the car taken for the purpose of insurance and is the maximum liability of the insurer in case your car is stolen or is damaged beyond repair.
- Total Loss: Total loss is applicable when the car is theft or completely damaged without any value for salvage. In case your car is stolen and cannot be recovered, then it is considered as a total loss situation.
- Constructive Total Loss: Constructive total loss is applicable when your car is damaged due to an accident and the repair costs exceed 75% of the Insured declared value. In such scenarios the invoice price of the car is paid to the insured if the RTI add-on was opted at the time of policy issuance.
- Ex-showroom Price: It is the price at which the car is manufactured in the plant and the transport cost included to bring it to the showroom The applicable taxes are also included in the Ex-showroom price before displaying it to the general public. The ex-showroom price also include dealer’s margin for the sale made.
- Road Tax & Registration Charges: Road tax is the amount paid to the particular state government in which you intend to drive the vehicle. The registration charges are paid to the government for registering the vehicle in your name. These charges vary from state to state and are to be paid each time a new vehicle is registered.
If opted for Return to Invoice cover, in case of total loss or constructive total loss the invoice price of the car is paid to the policyholder.
Not applicable for:
- Small claims under your car insurance policy are not covered under the RTI cover
- If the claim amount is less than 75% of the total IDV value.
RTI is a better option in case of theft or total damage of vehicle. If your area is prone to car theft, then it is highly advisable to have a RTI add-on in your comprehensive insurance policy. The cost of Return to Invoice add-on is almost 10% of the comprehensive insurance premium. The RTI cover is available only up to 2 years of vehicle age and in some case up to 3 years of vehicle age.
For instance, Mr. Harris has purchased a brand new car worth Rs.8 Lacs and insured with XYZ insurance company for an IDV of Rs.7.6 Lacs. He ignored the insurance agent advice to opt for Return to Invoice add-on and has taken only the Zero depreciation add-on cover. He parked his car outside his house and left for a family function in another town. After returning from the function he found that his car was stolen and informed his insurance company.
Since it was a total loss claim and the car was not traced, the insurance company paid him the IDV value which was Rs.7.6 Lacs. Now Harris has to contribute around Rs.1.5 Lac for purchasing the same model car from the market. Had he opted for the Return to Invoice cover, he would have been paid the Invoice price of the car thereby saving himself from the extra burden of payment.
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