Difference Between Zero Depreciation and Return to Invoice Cover

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Whether you buy a comprehensive car insurance policy or a third-party liability cover, none of these covers the cost of ownership and depreciation. This is where car insurance add-on covers like Return to Invoice and Zero Depreciation come into the picture. Let us discuss these add-ons and understand the difference between them.

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      What is Zero Depreciation Add-on Cover?

      Everything depreciates with time, and so does your car. But did you know that depreciation affects your car claim pay-out as well? If your car encounters damage in an unfortunate accident, such as a collision, your insurance provider will pay for the damage repairs after deducting the amount of depreciation on the car and its parts.

      However, if you have zero depreciation add-on cover in your car insurance policy, you can easily claim the deducted value of depreciation. This can also save your out-of-pocket expenses.

      But before buying zero depreciation car insurance add-on cover, here are a few points that you must know:

      • Zero depreciation cover is available for the car that is up to five years old. After five years, your car is not eligible for this cover. However, some insurers sell this cover for 7–year-old cars as well.
      • This cover can limit the number of claims that you can file in one policy year. However, this factor varies with the insurer.
      • The premium of a car insurance policy with a zero depreciation cover is comparatively higher than a standard car insurance policy.
      • The coverage of an insurance policy with zero depreciation cover is also not 100%. One needs to pay the compulsory excess amount levied by the insurer.

      What is Return to Invoice Add-on Cover?

      The insurance price of a vehicle is largely dependent on the Insured Declared Value or IDV of the vehicle. In case of an accident, if you have a comprehensive vehicle insurance policy, you get back the IDV only.

      But what if your car encounters a total loss where damages are beyond repair? In such a situation, return to invoice cover will come to your rescue. Return to invoice (RTI) is an add-on that covers the gap between the actual value of your car and its IDV. RTI helps to fetch the purchase value of your car in case of theft or a total loss. 

      However, before opting for the return to invoice cover, here are a few things that you must know:

      • Return to invoice cover is available only when your car is repairable and usable for over 75% of the Insured Declared Value. However, your car is not eligible for this add-on cover if it is more than three years old.
      • This cover is useful in case of fire or theft and cannot be utilized as an option for minor repairs and dents.
      • You can buy this add-on cover if you live in an area that is accident-prone. For instance, the areas that do not have secure parking or have high car theft chances.
      • The premium of your basic comprehensive car insurance policy increases by 10% upon opting for this cover.

      Return to Invoice vs Zero Depreciation Cover

      Let us now understand the difference between the return to invoice and zero depreciation add-on cover with the help of this table:

      Parameter Zero Depreciation Cover Return to Invoice Cover
      Definition A zero depreciation cover offers coverage for the depreciation borne by the insured car and its parts at the time of claim settlement.  Return to Invoice allows a policyholder to receive compensation equal to the invoice value of the insured car. 
      What does it do? It fills the difference between the actual cost of various parts of the car and its depreciated value. It bridges the gap between the insured car’s IDV and the original value of the car.
      Purchase Limit A zero dep cover can be purchased for cars of up to 5 years.  An RTI cover can only be bought for cars that are 3 years old or less.
      Example Mr. A’s car got damaged in an accident. However, he has zero depreciation cover as a part of his comprehensive car insurance policy. This cover worked as a financial help because he got compensation for the depreciated value of the damaged parts of the car at their original cost. Mrs. B’s car was stolen and could not be traced. Since she has the return to invoice cover as a part of her motor insurance policy, she got the original invoice price of her car at the time of claim settlement.

      In the aforementioned examples, we can see that one sensible decision of these two people has saved them from a lot of financial loss that they would have faced without these add-on covers.

      Over to You!

      A car insurance policy is mandated by law in India. It also provides you financial protection in case of unfortunate events like accidents or theft of your car. However, sometimes, a comprehensive motor insurance policy becomes insufficient which is why add-ons like zero depreciation and return to the invoice cover are offered.

      With zero dep vs RTI, you can understand why these two add-ons are the most advantageous. Nonetheless, it is up to you to decide whether you should buy these add-on covers with your four-wheeler insurance policy or not.

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