Purchasing a car is one of the most significant investments in an individual?s life. So it is necessary to protect your car with a good insurance policy and adequate add-ons.
A comprehensive car insurance policy is instrumental in safeguarding your car against theft, accidents and natural calamities. It also offers protection from third-party liability. However, the significance of the bouquet of add-on covers offered by insurers today is, beyond doubt, unparalleled. One such effective add-on cover is the Return to Invoice (RTI) coverage for car insurance.
What Are The Advantages Of The RTI Add-On?
RTI is an option provided by insurers to bridge the gap between the invoice value of the vehicle and its Insured Declared Value (IDV). By availing this coverage, you are liable to get a reimbursement of the entire loss incurred, i.e, the on-road price that was paid for the car, if you happen to lose the vehicle.
- The cost of the RTI add-on is usually 10% more than the comprehensive car insurance policy.
- The RTI add-on is offered by insurance providers until the vehicle reaches a predefined age limit.
Insured Declared Value In Auto Insurance
In car insurance parlance, depreciation is defined as the reduction in value of your vehicle owing to the wear and tear that it experiences with time. The value of depreciation starts at 5% for newly purchased cars.
Insured Declared Value (IDV) is the total value of the car that will be paid by the insurer if it has been stolen or damaged beyond repair. The IDV is agreed upon by the insurance provider and the policyholder at the time of purchase of the motor insurance policy. This value represents the cost of the car after the depreciation has been deducted from the original sale price of the vehicle.
When is the RTI applicable?
- Using the Return to Invoice cover, you cannot claim for small cracks or dents on your car, as minimal damages do not come under the ambit of this add-on cover. The RTI scheme is useful when you are looking to retrieve financial losses arising from a stolen vehicle or a car that has been completely damaged.
- If you stay in a theft-prone area or if your car is not usually parked at a secure place, you can opt for the RTI add-on cover to enhance your auto insurance. In case you meet with an accident that damages your vehicle beyond repair, you can get a complete reimbursement of the initial cost of the car when you are protected by this cover. This is particularly significant when your car is absolutely new. The main advantage of this cover as opposed to other add-on packages is the fact that you will be able to retrieve the invested on-road price of the car.
- The depreciation of a vehicle is generally 5% for the initial 6 months from the date of purchase. It subsequently increases to 10% the next year, and continues rising for each following year. This could amount to a large depreciation value for a car that is relatively new. Hence, all new car owners should consider adding this cover to their comprehensive car insurance policy.
- It should be noted that the Return to Invoice cover is not offered to vehicles that are more than 3 years old. This is due to the fact that a car that is older than 3 years would have a significant amount of wear and tear that cannot be ignored during claim settlement. The insurer would practically be at a loss if they offered you this facility.
- When the insurer settles a claim, they may either pay you the entire on-road price of the car or exclude the cost of specifics, i.e, road tax, registration charges, etc., that are specified in the invoice. They may also compensate you on the basis of a percentage in addition to the ex-showroom price of your car. The insurance policy documentation will elaborate the scope of settlement; so it is important to read through the documents carefully.
In effect, you need not consider the option of an add-on RTI cover if you reside in a safe locality, as it would then be an added cost to the premium that you are not likely to benefit from.
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GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017