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 Mean?
Let’s begin with a ‘New for Old’ definition. It implies that lost, damaged or stolen items will be replaced with brand new, like-for-like items or those of equivalent specification. Indeed, most Home Insurance policy wordings now carry that definition.
It’s important to note that policies with an 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. Be sure to check with your broker or insurer if you’re unsure which type of policy you have.
New for Old Examples
Say, for example, you bought a new, top-of-the-range smartphone, which was stolen 3 years after purchase, your insurer would replace it with the same make and model, of the same specification. If that particular phone were no longer available, the insurer would look to replace it with the closest possible model, rather than the latest version.
Alternatives to New for Old
There are a few other remedies sometimes provided for in the policy wording, such as repair 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 advisable to check your Home Insurance wording to see what options are available should you suffer a loss.
Common Conditions of New for Old Contents Insurance
If a cash payment is offered instead of replacement, this is normally based on what it would cost the insurer to replace the item through its preferred suppliers.
Wear-and-tear deductions may be made for items of clothing or household linen and 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 agreement or rental agreement).
If an item is part of a set (other than a pair) or a suite, replacement is usually limited to the individual item, even if it can’t be matched to the remaining items in the set or suite. The exception is normally High Value Home Insurance, where sets and pairs are covered as standard.
In order for a claim to be met fully by your insurer, the sums you insure must be adequate. For example, if you’ve under-valued your contents you risk being under-insured and any claim could be reduced by the same factor.
Check Your Home Insurance Policy Wording
Your policy excess applies to contents claims too. Consider this in conjunction with your Home Insurance policy wording and you’ll know exactly what circumstances merit a claim and what the likely outcome will be. For instance, if the cost of the excess is higher than the price of a replacement, it’s unlikely to warrant a claim.
The benefit of using a broker is that we’ve already pored over the wordings for the policies we recommend and can save you all that legwork.
If you have particular requirements in relation to your cover – or you have any concerns – we can easily address those for you. Simply give us a call on 0800 917 2274.
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