RTI vs IDV: Which One is Better in Total Loss or Vehicle Theft?
When choosing a car insurance policy, it is important to understand the difference between Return to Invoice (RTI) and Insured Declared Value (IDV).
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What is IDV in Car Insurance?
IDV in car insurance is the insured car's current market value. It represents the highest amount your insurance company has put for your car. In the event of car theft or total loss (when your car gets damaged beyond repair), the insurance company reimburses you the IDV at the time of the incident. IDV is part of every comprehensive car insurance policy. The insurance company considers the depreciation of your vehicle at the time of a car insurance claim payout.
How is IDV in Car Insurance Calculated?
The IDV is calculated based on the car's invoice value and subtracting the depreciation amount based on its age. As a result, the older your car, the lower its IDV, which implies your claim payout will reduce over time. Here is the formula to calculate the IDV of your car:
IDV= (Selling price of the car- its depreciation amount) + (Cost of any accessories installed- Depreciation of accessories)
Alternatively, you can use an IDV calculator online to get an estimate of your car's IDV. Have a look at the table below that shows the car depreciation rates, which are fixed by the Insurance Regulatory and Development Authority of India (IRDAI):
| Vehicle Age |
Depreciation Percentage |
| Below 6 months |
5% |
| Between 6 months & 1 year |
15% |
| 1 - 2 years |
20% |
| 2 - 3 years |
30% |
| 3 - 4 years |
40% |
| 4 - 5 years |
50% |
Note: For cars over 5 years of age, IDV is decided mutually by the insurer and the car owner based on the vehicle's condition.
Importance of IDV in Car Insurance
The IDV has a direct impact on your car insurance premium. A higher IDV means a higher policy premium. To save on insurance premiums, some vehicle owners purposefully select a lower IDV amount. However, this can backfire at the time of claim settlement since you will only be paid the IDV, irrespective of the actual market value of your car.
What is RTI in Car Insurance?
Return to Invoice (RTI) is an add-on cover available with a comprehensive car insurance policy. It bridges the gap between the IDV of your insured car and its original invoice value. If your car suffers a total loss or gets stolen and it cannot be repaired or recovered, the RTI (also known as Invoice Protect) add-on will help you get the complete invoice amount of your car.
It includes your car's ex-showroom price, registration, and road tax. Hence, RTI provides you maximum compensation as if you get the entire amount you paid when purchasing your car. Here are some key details about return to invoice in car insurance:
- Add-on Cover: RTI is an add-on cover, and comes for an additional premium
- Protection against Depreciation: You receive the same value as on the invoice, and it is not reduced due to vehicle age.
- Applicable to New Cars: RTI in car insurance is available generally for vehicles up to 3-5 years old, depending on the insurer.
IDV vs RTI in Car Insurance
Here is the comparison of return to invoice (RTI) and Insured declared value (IDV) in a car insurance policy:
| Feature |
IDV (Insured Declared Value) |
RTI (Return to Invoice) |
| Definition |
Market value of the car after depreciation |
Original invoice value (including road tax & registration fees) |
| Coverage |
Base protection in case of total loss or theft |
Compensates the depreciation gap |
| Applicability |
Any age (part of a standard comprehensive policy) |
Only in case of total loss or theft |
| Cost |
Included in a standard policy |
Additional 10-15% premium amount |
IDV or RTI: Which is Better?
To determine whether RTI or IDV in car insurance is more beneficial, let's take a scenario:
You purchased a car worth Rs. 12 Lakh and paid Rs. 1.5 Lakh for registration and road tax. After 2 years, your car's IDV will reduce to around Rs. 9.50 Lakh because of depreciation.
If Your Car Gets Stolen of Suffers Total Loss
- Without RTI: Your insurer pays you only the IDV, which is Rs. 9.50 Lakh, which is significantly less than the amount you paid at the time of vehicle purchase.
- With RTI: You receive the complete invoice value of your car, which is Rs. 13.50 Lakh. Hence, RTI fills the depreciation gap and is ideal in case of irrecoverable loss.
In Case of Minor Repairs or Cosmetic Damage
- RTI in your car insurance policy will not apply here. Your standard policy coverage will apply and cover partial damage if you don't have a zero depreciation add-on in your car insurance.
Hence, Return to Invoice is more beneficial than IDV if you want the highest level of protection against financial loss due to vehicle theft or total loss. RTI bridges the gap between your car's depreciated amount and its original purchase value. Thus, for maximum peace of mind, especially with a new vehicle, RTI is highly recommended.
Who Should Opt for RTI in Car Insurance?
You should opt for RTI in car insurance under the following conditions:
- New Car Owner: It is ideal to opt for RTI in car insurance if your car is new, i.e., under 3 years old.
- Luxury Car Owner: RTI in car insurance is highly beneficial if you own a high-value or luxury car, since its depreciation is rapid.
- Resident of High-Risk Areas: You should choose RTI add-on cover in car insurance if you live in an area with a high theft rate, prone to floods, or is accident-heavy.
- Loan Holder: If you have an outstanding car loan, choose RTI add-on in car insurance as it will relieve your loan repayment stress in an event of vehicle theft or total loss.
Limitations of RTI in Car Insurance
While RTI add-on offers a significant benefit when your gets stolen or suffers total loss, it has some limitations. Have a look:
- The Return to Invoice add-on cover only applies to total loss or vehicle theft, and not partial or cosmetic damage.
- RTI is typically available for cars up to 3-5 years old (varies by insurer)
- Your car insurance premium is around 10-15% more than a standard policy
- RTI add-on does not cover any accessories if you have installed, particularly aftermarket.
Final Take
When you choose your car insurance, it is important to consider individual needs. Always choose the IDV amount that matches your car's current market value. At the same time, if your vehicle is relatively new, opting for the RTI add-on is beneficial. Remember, it is wise to compare car insurance quotes before buying the policy. It helps you find the right balance between premium costs and coverage.
