Zero Depreciation Vs Return To Invoice: Key Difference Explained

• Learning the difference between zero depreciation & return to invoice helps you weigh their features and associated premium costs to make an informed decision.
• Under zero depreciation, you are likely to receive the entire amount towards repairs i.e. the insurer will normally not deduct depreciation-related expenses.
• In the case of return to invoice, the claim settlement is likely to be based on your car’s invoice value as against its IDV (Insured Declared Value).

You might know that insurance cover add-ons increase the scope of your policy and strengthen the protection cover. By paying an additional amount, you can buy add-ons and enjoy more benefits.In this blog, we will talk about two common add-ons i.e. zero depreciation and return to invoice. We will not only discuss each of these in detail but also decode the difference between zero depreciation & return to invoice.This will help you to understand what makes them different from each other and when it is the most beneficial to buy these covers. Let’s get started!

If you have bundled your motor insurance with a zero depreciation add-on, the insurer doesn’t deduct the depreciation-related expenses at the time of claim settlement.Depreciation is the reduction in the value of your car and its parts, which takes place during the course of use. It is charged at the rates determined by the Insurance Regulatory and Development Authority of India (IRDAI) and is subject to changes.Let’s consider an example:The cost of repairs for your damaged car is ₹1,00,000. The insurer will typically deduct the depreciation on the parts to be replaced and settle the balance amount. Let’s assume the depreciation rate is 20%. Thus, your claim will likely be settled at ₹80,000.However, if you have a zero depreciation cover, the insurer will generally settle the entire amount without deducting depreciation. You can expect to receive the full ₹1,00,000 in this case.

Hypothetically, if your car is damaged beyond repair or is stolen, your insurer will pay you the market value, i.e. he will consider the IDV (Insured Declared Value) for claim settlement.However, if you have the return to invoice add-on, your insurer will consider the invoice value of your car for claim settlement. Thus, through this add-on you can expect a higher claim settlement.

Here is an example:

Let’s assume you recently purchased a new car at₹12,00,000 and its current market value is ₹10,00,000. This reduction in the market value is due to depreciation. Unfortunately, your car gets stolen and cannot be traced.In this case, the insurer will normally settle the claim at the current market value i.e. ₹10,00,000. However, if you have availed of the return to invoice cover, your claim is likely to get settled at ₹12,00,000 i.e. its invoice value.

While both are add-ons, each of them has distinct features, which largely form the difference between zero depreciation & return to invoice.Here is a tabulation of the difference between zero depreciation & return to invoice that will help you understand both these add-ons better:

Knowing these respective features helps in weighing both the options neutrally. Understanding the difference between zero depreciation & return to invoice guides you to identify and select the most-suitable add-on to expand the scope of your motor insurance.

After knowing the difference between zero depreciation & return to invoice, you may want to know which add-on makes an ideal choice.There is no one right answer here. You must evaluate all benefits and the also the related premium costs before deciding to choose one. The difference between zero depreciation & return to invoice highlights that these add-ons will be beneficial for new car owners as well as the owners of luxury cars.Besides, if you are living in an area where the accident rate is high, or if you don't have a garage to park your car, or if you are new to driving, you may consider zero depreciation. On the other hand, if you have availed of a vehicle loan or are living in a theft-prone area, you may consider return to invoice.All-in-all, you must understand the difference between zero depreciation & return to invoice and then select the one that meets your requirements closely.

Learning the difference between zero depreciation & return to invoice, will help you make an informed choice. As explained above, consider the features and associated premium costs before making any decision.However, do not delay any further and buy the most-suitable add-onto enjoy additional benefits. Buying an add-on will help you prepare better for financial emergencies by strengthening your motor insurance cover further. Enjoy wider coverage and happier rides! Also Read: Zero Depreciation Car Insurance Policy - Explore Coverage, Claims and Benefits