Return To Invoice (RTI) in Car Insurance

24 September 2018

Affording a car has become very easy today thanks to banks and NBFCs that offer car loans. That said, cars are expensive and make for a huge financial investment in one’s life. But if you are lucky enough to tick this goal of your bucket list, you must also ensure you purchase car insurance. While the Motor Vehicle Act of 1988 states that it is mandatory for all vehicle owners to own a third party liability insurance cover, logic dictates that it is better to invest in a comprehensive car insurance policy that offers all-round coverage for your vehicle. Such a policy protects your car against accidents, thefts, natural and manmade calamities and also provides several add-on covers. The return to invoice cover is an effective add-on cover you can get with your new car insurance. Let’s find out what it is.

What is RTI in car insurance?

RTI or return to invoice cover is essentially an additional option provided by your car insurance provider. The add-on option basically covers the gap that exists between the insured declared value of your car and its invoice value. If you opt for RTI cover with your car insurance, you can recover the entire cost of the vehicle including the on-road taxes paid towards it, in case your vehicle is lost, stolen or damaged beyond repair.

RTI car insurance – Things to remember

1. Cost and validity:  Adding the RTI cover can cost you approximately 10% more than a regular comprehensive car insurance policy. Additionally, the add-on cover can only be taken with a new car and is valid only for a period of three years from when the car is first purchased. The return on invoice option is suspended after three years since cars older than 3 years would typically have a substantial amount of wear and tear. This factor cannot be ignored by insurance providers if an RTI claim is made and the insurer would have to book a loss for offering this facility.
2. Complete reimbursement vs IDV:  If you do not opt for RTI in car insurance, the insurer would simply provide reimbursement of the total sum assured as per your policy i.e. the insured declared value, which is adjusted keeping annual depreciation values in mind. Note that the value of a vehicle begins depreciating by 5% within the first 6 months from the purchase date. Within a year, the value of the vehicle depreciates by 10% and the depreciation percentage continues to rise with every passing year. Should anything happen to your car, during this time, you would be booking a huge loss as the value of the vehicle depreciates. But if you have RTI car insurance, you do not have to worry about the depreciating value of your vehicle and can get complete reimbursement of the amount paid to purchase the vehicle.
3. RTI protects your car against thefts:  As mentioned above, if you have RTI cover, you can recover the entire cost of your car if your vehicle is stolen within the first three years of purchase. RTI cover is essential for people who do not have secured parking spaces or are living in theft prone areas since you can recover the entire cost of your vehicle in case it is stolen.
4. RTI protects your car against damages caused due to accidents:  In case you are in an accident that damages your car beyond repair, you become eligible for complete reimbursement of the actual cost of the car if you have the return to invoice add-on with your car insurance policy. As such, in case of irreparable damaged caused to the car within the first three years, you can retrieve the entire invested amount, which includes the on-road price of the car.
5. Allows you to drive peacefully

Knowing that your vehicle is insured, you can drive around with a peace of mind, without being trapped in the constant fear that you will have to incur considerable costs in case of any damage to your car.

What are the tax benefits of auto insurance?

Unlike the tax benefits associated with other insurance policies, there is a catch involved when it comes to claiming tax benefits for a motor insurance policy. You are eligible to claim a tax deduction only when the vehicle is being used for commercial or business purpose. If the vehicle is being used for personal purpose, you will not be eligible to claim a tax deduction. While claiming the tax deduction when the car is being used for business purpose, one has to justify that there is no personal use involved in the same. Another essential point to be noted is that when a vehicle is being used partly for personal use and partially for commercial use, then the tax deduction can be claimed in proportion to the time for which the vehicle is being used for business purpose. To illustrate, if a vehicle is being used for 10 hours in total where 5 hours is for personal use and 5 hours is for business use, then the insured can claim the tax deduction for the 5 hours for which the vehicle has been used for a business purpose.
To claim the tax deduction, the insured must maintain all the documents such as fuel receipts, invoices for expenses for the car and premium receipts carefully.

Conclusion

You may be investing a lot of time and research to decide which vehicle you want to buy. But it is equally essential to ensure that you also procure the right auto insurance policy as that is going to be a real life-saver in various situations. That is why, you may want to cosider an Car insurance policy from Liberty General Insurance.