With ‘New for Old’ a common feature of many Contents Insurance policy wordings, we explain what it means and how it works in practice.
What does New for Old Insurance mean?
Let’s begin with the New for Old Insurance meaning. New for Old implies that a lost, damaged or stolen item will be replaced with a brand new, like-for-like replacement or one of an equivalent specification.
Indeed, most Home Insurance policy wordings (and cover for specific appliances, such as TV Insurance), now carry that definition.
New for Old example
Say, for example, you bought a new, top-of-the-range smartphone, which was stolen 3 years after purchase. With New for Old Insurance, your insurer would replace it with a new like-for-like replacement. This means you would get the same make and model, of the same specification.
If that particular phone was no longer available, your insurer would look to replace it with the closest possible model, rather than the latest version.
However, you need to be aware that policies with indemnity wording won’t replace items with new equivalents.
These policies take wear and tear into consideration, which means if your 5-year-old laptop is broken, it will be replaced with another 5-year-old laptop. Check with your broker or insurer if you’re unsure which type of policy you have.
What is covered by New for Old Home Insurance?
New for Old Home Insurance typically covers the following:
- Valuables, such as jewellery and watches
- Furniture, including beds, dining tables and sofas
- Appliances such as washing machines, freezers, fridges and ovens
- Electronics, including mobile phones and laptops
- Floor coverings such as rugs and carpets
Alternatives to New for Old Insurance
In some cases, you may be given another option by your insurer if you make a claim on your Contents Insurance. For instance, instead of New for Old, you may be offered repair cover or a cash settlement. The insurer’s course of action depends on a number of factors, including the availability of replacements or the strength of its repairer network.
Policy wordings differ slightly between insurers too, so it’s a good idea to check your Home Insurance to see what options are available should your belongings be lost, damaged or stolen.
Common conditions of New for Old Contents Insurance
If a cash payment is offered instead of a like-for-like replacement, this is normally based on what it would cost your insurer to replace the item through its preferred suppliers.
Wear-and-tear deductions may be made for clothing or household linen. This is because these items can deteriorate quickly. You may also get deductions for property that doesn’t belong to you, unless you are responsible for the cost of replacement as new under the terms of an agreement (such as a finance or rental agreement).
If an item is part of a set (other than a pair) or a suite, New for Old replacement is usually limited to the individual item. This is the case even if the replacement can’t be matched to the remaining items in the set or suite. The exception is normally High Value Home Insurance, in which sets and pairs are covered as standard.
Beware of underinsurance
In order for a New for Old Contents Insurance claim to be met fully by your insurer, the sums you insure must be adequate. This means you must not underestimate how much your belongings are worth.
For instance, if you value a watch at £500 but it has actually gone up in value and is now worth £800, you will be underinsured. This means your insurer will not pay out for the full claim, leaving you out of pocket.
Is New for Old worth it?
New for Old Contents Insurance can certainly be worth it, particularly for items that may lose value over time.
If you have a belonging that has depreciated and you don’t have New for Old Insurance, you could get a smaller payout. This is because your insurer will only cover what your item is worth at the time of the claim.
With New for Old Contents Insurance, your insurer will pay you for what that specific make and model (or equivalent) is worth brand new.
Check your Home Insurance policy wording
Your policy excess applies to contents claims too. If you’re thinking about making a claim, you need to bear this in mind, along with the other terms and conditions in your Home Insurance policy. This will help you to decide if it is worth making a claim and whether you are likely to get a successful outcome.
For instance, if the cost of your excess is higher than the price of replacing an item yourself, a claim probably isn’t worthwhile.
Talk to us about your Home Insurance
The benefit of using a Home Insurance broker such as us is that we’ve already pored over the wordings for the policies we recommend. This means that we can save you a lot of legwork, and we could even save you some money!
If you have questions about your Home Insurance cover or want to make sure you’ve got the right protection in place, feel free to get in touch. Simply give us a call on 0800 917 2274 today.
