Car Insurance Add-On Covers – Difference Between Zero Depreciation and Return to Invoice

Whether you own a sedan or hatchback, your car is your valuable possession, and hence you always go an extra mile to protect it. A car enthusiast knows that with a regular car insurance, it is equally important to get some useful add-ons. So, whether you buy a comprehensive car insurance policy or third-party liability cover, none of these cover the cost of ownership and depreciation. It is where additional covers like Return to Invoice and Zero Depreciation come into the picture.

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Both these types of car insurance add-on covers are designed in a way that they make sure to save your finances in case your car encounters an accident, theft, natural calamity, fire, etc. Here we shall discuss these two add-on covers in detail and understand the difference between these two.

What is Zero Depreciation Add-On Cover?

Everything depreciates with time, and so do the cars, but do you know that this affects your car claim pay-out as well? If your car encounters damage in an unfortunate, your insurance provider will pay for the damage repairs after deducting the amount of depreciation of the parts of the car.

However, if you have added Zero Depreciation cover in your insurance policy, you can easily claim the value of depreciation. This can save your out-of-pocket expenses. Before buying this cover, here are a few points that you must know about this add-on cover:

  • 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.
  • This cover can limit the number of claims that you can file in one policy year. However, this can vary with the insurer.
  • The premium of a car insurance policy with a zero depreciation cover is comparatively higher than a normal comprehensive 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 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.

However, what if your car encounters total loss where damages are beyond repair? Return to Invoice is the add-on that covers this gap between the actual value of your car and its IDV. RTI helps to fetch the purchase value of your car, i.e. its purchase value in case of its theft or total loss. However, before opting for this cover, here are the few things that you must know about it:

  • Return to Invoice cover is available only when your car is repairable and usable over 75% of the Insured Declared Value. However, your car is not eligible to avail of 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, i.e. 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.

Difference Between Zero Depreciation Cover and Return to Invoice Cover

Parameter

Zero Depreciation Cover

Return to Invoice Cover

Definition

Zero depreciation cover applies to vehicle repairs when the vehicle is damaged in a natural calamity, accident, fire, or manmade disaster.

Return to Invoice add-on cover is useful when your car is damaged beyond repairs or stolen.

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 actual value of the car.

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 additional cover worked as a financial help because he got the compensation for the damaged parts of the car at their original cost.

Mrs. B’s car was stolen and could not be traced. Since she has Return to Invoice cover as a part of her car insurance policy, she got the price of her car due to this add-on cover.

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, despite this, it also provides you financial protection in case of unfortunate events like accidents or theft of your car. However, sometimes, a comprehensive car insurance policy becomes insufficient, and to handle such cases, add-ons are provided by insurance companies.

Out of various additional covers for cars, zero depreciation cover and return to the invoice are the most advantageous as mentioned above. In the end, it is up to you whether you should buy them with your comprehensive car insurance policy or not.

Written By: PolicyBazaar - Updated: 08 July 2021
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