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Difference between Zero Depreciation & Return to Invoice

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Your car, whether a hatchback or sedan, is a prized possession. You go the extra mile to maintain and protect it. In fact, a car enthusiast understands that apart from regular servicing, purchasing car insurance is equally vital. When you purchase a comprehensive car insurance policy, its numerous inclusions ensure holistic protection for your car. However, there is a caveat; conventional comprehensive insurance policies do not cover an important aspect of car – depreciation and cost of ownership.

This is where add-on covers such as Zero Depreciation and Return to Invoice come into play. Both these covers are designed to ensure that the finances of a car owner-driver do not take a hit in case of an accident, natural calamity, theft or fire. In this blog, we shall discuss both these covers in detail and explain the difference between the two.

What is Zero Depreciation Cover?

All car owners-drivers understand that age and regular exposure to roads depreciates the value of the car. But do you know that this affects your claim payout too? If your car is damaged in an unfortunate event, your insurance company will pay for the repairs after deducting the depreciation amount of the car parts. However, if you have Zero Depreciation cover, you can claim the depreciation value, saving your out-of-pocket expenses. Before you purchase this cover, here are few things you should know about this cover:

• Zero Depreciation cover is available for a car only up to five years old, after which your vehicle will not be eligible for this cover.

• This cover may often limit the number of claims you may file during the year under the policy. However, this may vary from insurer to insurer.

• The premium with Zero Depreciation cover will be higher than your basic comprehensive car insurance policy.

• The coverage, even with the Zero Depreciation add-on cover, will not be 100 per cent. You need to pay the compulsory excess levied by the insurance company.

What is Return to Invoice?

Vehicle insurance is largely based on the Insured Declared Value or IDV of the car. In case of an accident, if you have a comprehensive car insurance policy, you only get back the IDV. But what in case of total loss where the damages are beyond repair? Return to Invoice add-on options covers the gap between the IDV and the invoice value of your car, along with the registration and other applicable taxes. RTI helps you fetch the car's purchase value (on-road price) in case of theft or total loss. Before you purchase this cover, let us take you through a few things that we feel you should know about this cover:

• RTI is only applicable if your car is unusable and repair is over 75% of the IDV. However, your car is not eligible for this cover if its over three years of age.

• This cover comes into force in case of theft or fire and cannot be used as an option for minor dents and repairs.

• The cover is a good option if you live in an accident-prone area, i.e. areas with high car thefts, no secure parking etc.

• Return to Invoice costs you around 10% more than your basic comprehensive policy.

Difference between Zero Depreciation & Return to Invoice

The main distinction between the two add-ons is that a Zero Depreciation add-on cover applies to repairs when the car is damaged in an accident, fire, natural or manmade calamity. It fills the chasm between the actual cost of the car’s part and its depreciated value. On the other hand, Return to Invoice add-on cover comes in handy when the vehicle is damaged beyond repair or stolen. This add-on bridges the gap between the insurance policy’s IDV and the car’s invoice value.

Still confused? Let us explain the difference to you with an illustration.

Astik and Mona each have their cars. On a tragic day, Astik was involved in an accident, and Mona’s car was stolen. While Astik’s car was partially damaged, Mona's car could not be traced. They are, however, a wise couple who had both Zero Depreciation and Return to Invoice coverage as part of their comprehensive car insurance policy.

In Astik’s case, the insurance came to his rescue, and he was compensated for the damaged car parts at the original cost of the parts. The value of the car parts did not depreciate because of the add-on cover. In Mona's case, she received the price she paid for the car because of the Return to Invoice feature. One sensible decision saved them both a lot of money that would have otherwise gone towards repair and replacement!

Conclusion

The insurance for vehicle will financially protect you in case of an unfortunate event involving the insured vehicle. However, if you want to enhance the coverage, you should consider purchasing add-ons in addition to your comprehensive car insurance. Both Zero Depreciation and Return to Invoice have advantages, and whether you choose one or both depends on your needs. Before purchasing a policy, you can compare car insurance online to get the best quotes.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.

This blog has been written by:

S. Gopalakrishnan | Motor Insurance Expert | 40+ years of experience in insurance industry

A veteran in insurance industry, S. Gopalakrishnan is a name to reckon with in the field of reinsurance; he has headed the Reinsurance department and has rich experience in other fields of motor insurance. He loves to share his opinion on the latest topics in the insurance industry and how he can help people in safeguarding their assets using insurance products.

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Few Other Articles:

• Return to Invoice Cover in Brief

• 4 Factors to Know About Zero Depreciation Insurance for Car

• How to Decide Which Add-on Cover Do You Need For Your Car

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