New for old cover

New for old insurance cover is a simple insurance term that means if an item in your home is lost, damaged beyond repair or stolen, then your insurance provider will cover the cost of a brand-new replacement item of equivalent value. In comprehensive home contents insurance policies new for old is a standard policy. However, if you don’t have new for old cover, it’s likely that you will have indemnity cover (or ‘wear and tear’ cover) instead.

If the exact item you’re claiming for is no longer available, then your insurer will pay you enough to buy a similar item. For example, if your television is damaged beyond repair, then you should be paid out enough for you to replace it with an equivalent new one, even if the original television was several years old.

It’s worth going into a bit more detail about how new for old cover insurance works in practice. Each situation will be different depending upon the item you are claiming on, and the policy you have chosen. A good example is if your mobile phone is stolen – though the phone may have been top of the range when you purchased it, it’s unlikely you will be given the newest, top-of-the-range model as a replacement. If the phone is still available from the manufacturer then you will be given enough to pay for that model, if it’s no longer in production then you will be given enough to pay for the closest model to the original mobile phone.

Certain items won’t be covered by new for old insurance, so make sure you read the policy carefully for exclusions. For example, some goods with shorter lifespans such as bed linens and clothing, are not likely to be covered. Always read the fine print of your policy so that you know how well you’re covered.

If you do not have new for old cover as part of your home contents insurance policy then you probably have indemnity cover instead, also known as ‘wear and tear’ policy. Indemnity cover only covers you for the loss of the item at the item’s value when it was lost, damaged or stolen. Therefore, if your five-year-old washing machine breaks then you will be compensated with a similarly old machine, or you will be paid its current value, which is likely to be far lower than when you first bought it.

When assessing your claim, the insurer will factor in the depreciation in value of the item or items you are claiming on. This can be alright for individual item claims as often people were going to get the item replaced anyway and are happy with the cash they receive. However, with larger claims, it may be hard to replace multiple large items if you are only getting back the second-hand value.

Indemnity cover is satisfactory for some people, especially as it’s likely to mean you pay smaller premiums for your home insurance. This means that when you do need to make a claim, the relatively small pay-out you receive can be topped up with what you have saved by paying smaller premiums.

Both new for old and indemnity cover require you to pay an excess each time you claim, which is important to remember when agreeing to a policy. If you choose a higher voluntary excess then your premium will be cheaper as your insurance provider has less to pay out when you make a claim, but make sure it’s not too large as you may then struggle to afford to make a claim at all.

Always remember to check that you have protected your home and your possessions to a suitable level first, before worrying about the price of the policy. It’s important that you are satisfied with your level of cover when picking the right policy so whether you make claims or not, it’s good value either way.