Summary/TL;DRB
Return to Invoice (RTI) cover is an add-on in car insurance, that protects you if your car is stolen or declared a total loss. It covers the difference between the car’s depreciated market value and the actual invoice value you paid for it. Usually, car insurance policy settlements are based on the Insured Declared Value. IDV decreases every year due to depreciation, and for financed vehicles, this can leave car owners paying EMIs even after the insurance payout, but RTI helps in avoiding this. RTI ensures the insurer compensates up to the invoice value, helping you manage outstanding loan liabilities.
Introduction
Buying a car is a responsibility that extends beyond simply owning it or paying for it. If your car gets stolen or is declared a total loss, in case of an accident, and it is still not paid off, your financial obligation to pay off the remaining loan will still continue.
The insurance companies usually pay off the claim based on the insured's declared value, and this value is different from the original price of the car, creating a financial gap. Return to invoice is an add-on that helps in bridging this gap and ultimately reducing your financial liability.
What is Return to Invoice (RTI) Cover in Car Insurance?
Return to Invoice (RTI) cover is an add-on that is available with a comprehensive car insurance policy. RTI helps you get an adequate amount of claim so that you can get an amount that is based on your car’s original invoice value.
It is important to note that your vehicle depreciates with each passing year, hence the insured declared value also reduces on an annual basis. Return to invoice reduces this gap, and you get a fair amount of claim in case your car is stolen or declared a total loss.
RTI is generally available for newer vehicles under new car insurance, often within the first 3–5 years of registration.
For example, if a car purchased for ₹10 lakh is stolen after two years, the IDV may drop to around ₹7–8 lakh. Without RTI, the insurer pays the IDV amount. With RTI, the settlement may include the difference up to the invoice value.
Why is RTI Cover Particularly Important for Financed Cars?
RTI cover is important in financed cars because the liability to pay off the outstanding loan still stands even after the car is stolen or lost.
When you purchase a car and take a loan for it, you ideally set monthly instalments. So even if your car has been a total loss, you will get the value as per the IDV claim and not the invoice value.
In this case, the remaining loan balance may still be higher than the insurance payout, leaving you responsible for paying the difference out of pocket.
Read More: Return to Invoice Cover in Car Insurance
RTI helps reduce this financial gap by increasing the compensation amount closer to the original invoice price.
How Does Depreciation Affect Car Insurance Claims?
Depreciation reduces the insured value of your vehicle every year, and it directly affects claim payouts.
The IDV represents the current market value of the vehicle and is calculated after considering depreciation on the car and its parts. So, as the car gets older, the IDV also reduces. As a result, the claim amount paid by the insurer in case of total loss also becomes lower over time.
This simply means that the claim amount may not match the original purchase price of your car.
RTI cover compensates for this depreciation gap by considering the invoice value instead of considering IDV.
What Situations Typically Trigger RTI Cover?
RTI cover is generally triggered when the vehicle suffers a total loss or is stolen and cannot be recovered. It does not apply to partial damage repairs.
The list of common triggers includes:
- Major accidents
- Irreparable damage
- Confirmed theft
In case of an accident, if your car is severely damaged and repair costs exceed a specified percentage of its IDV, insurance companies may declare it a total loss. In such cases, RTI may increase the claim amount you will receive.
Is RTI Available With All Types of Car Insurance Policies?
No, return to invoice is not available in all types of car insurance. It is only available with comprehensive car insurance and not third-party insurance.
A third-party car insurance only covers damages caused to other people or vehicles. It does not cover damages to your vehicle, and is a liability based policy.
Read More: What to Know About Third-Party Car Insurance in India
RTI is an add-on that enhances the own-damage component of comprehensive insurance as it protects you from out of pocket expenses.
How Does RTI Cover Affect the Car Insurance Premium?
Adding RTI cover slightly increases the car insurance premium because it directly affects the claim settlement value.
Insurance premiums are calculated based on risk and potential payout, and RTI increases it, ultimately increasing the insurer's liability.
Therefore, insurers charge an additional premium to balance out their risk.
How is RTI Different From Standard IDV-based Claim Settlement?
Standard claim settlement in car insurance is based on the Insurer Declared Value, whereas RTI settlement is based on the actual invoice value of your car.
IDV represents the current value of the car, taking depreciation into account, but RTI represents the invoice value of the car.
Because of this difference, RTI can significantly increase claim settlement compared with a regular car insurance policy.
Read More on:Difference between Comprehensive and Zero Depreciation Insurance
How Can RTI be Added to a Car Insurance Policy?
RTI can be added as an optional add-on while purchasing or renewing a comprehensive car insurance policy.
Ideally, it is a beneficial add-on only when the vehicle is new. It is only applicable when the vehicle is 3-5 years old.
Policyholders can choose RTI based on their needs and budget while selecting a comprehensive plan.
Expert Note
This information is based on standard motor insurance guidelines issued by the Insurance Regulatory and Development Authority of India (IRDAI) and commonly followed industry practices. Policy coverage, add-on availability, and conditions may vary between insurers and across different car insurance plans in India.
FAQs
Below are some of the questions regarding Return to Invoice add-on:
