Sorting Out the New for Old Confusion
When you have a contents insurance policy, you may hear the phrase “new for old” mentioned quite often. This phrase can be quite confusing and so it is best to get it worked out before you need to make a claim.
New for old basically means that an insurance company will replace an item with an equivalent make, model or specification. This is where many policyholders get downhearted! When your old television gets accidentally broken, it is common to think that the insurance company will replace it with a brand spanking new, top-of-the-range plasma television instead. Unfortunately this is not the case. If your television was a 32” screen, the replacement will be a 32” screen and so on.
In the case of some items, such as clothing, linen and sometimes pushbikes, the insurance company may deduct a value in respect of wear and tear. This means that if you had a designer suit that you bought two years ago and it became damaged, a small percentage will be taken of the settlement amount of the claim you are making.
As well as new for old, many insurers will try and repair items if they can before offering a like-for-like replacement. If the item cannot be repaired and there is no new for old equivalent to be had, the insurer will ask for a value of the item from one of their experts. This value is then offered as a cash settlement to the policyholder as the insurer cannot provide a new for old replacement.
Remember, it is important to specify valuable items individually on your home contents insurance. There is nothing worse than having an expensive and rare piece of jewellery or antique that will be subject to a reduced settlement if a suitable replacement cannot be found.
It is best to check with your insurer what action is taken when you make a claim. Some
home contents insurance policies will not be on a new for old basis. The insurer will only pay out the value of the damaged, stolen or lost item based on its age. It is similar to taking a percentage off for wear & tear and so if you have a black and white television from the 1960’s, it is safe to say that you will receive a small settlement if you make a claim.
Many policyholders prefer to have their policy on a new for old basis. This ensures that you at least receive a replacement item that is in the same league as the one that you lost. If you have any questions about the new for old method, your
home insurance company will be glad to give you more detailed information about how it affects your particular policy.
