New-for-old contents insurance

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New-for-old is a common clause in home contents insurance policies. Here’s what it means

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What is new-for-old cover?

New-for-old home contents insurance replaces an item that’s been stolen or damaged beyond repair with a new object of the same value.

The most comprehensive home insurance policies provide new-for-old cover. This means they’ll pay out enough for you to replace any items you’re claiming for with new ones of the same type. If the exact item is no longer available, you should still receive enough for you to buy a similar item.

For example, if your television is stolen your insurer should pay out enough for you to replace it with an equivalent new one, even if it’s several years old.

However, not all policies offer the same level of cover. If you opt for indemnity cover, otherwise known as wear-and-tear cover, then rather than the insurer paying for a replacement item, they are instead compensating you for the loss of your item. So if you claim for a dishwasher that is four years old, you will be given a replacement dishwasher that is also four years old.

Will everything in my home covered by new-for-old cover?

Certain items won’t be covered by new-for-old cover, so make sure you check your policy for exclusions.

For example, goods which are considered to have a shorter lifespan than furniture or electrical appliances, such as clothing and bed linen, typically won’t be included.

What happens if my policy doesn’t include new-for-old cover?

If your policy doesn’t include new-for-old cover, it will typically offer what’s known as indemnity, or wear-and-tear, cover instead.

How does wear-and-tear cover work?

With wear-and-tear cover, your insurer may reduce the amount it will pay out when you submit a claim. This is to take account of the fact the item you’re claiming for may have depreciated in value or suffered wear and tear.

For example, if you’ve got an Xbox games console that you bought three years ago and it’s damaged by flooding, your insurer will only pay out what it was worth at the time the damage occurred. This is likely to be both less than the amount that you paid for it, and less than the cost of buying a new Xbox. 

The most commonly insured possessions

According to MoneySuperMarket data correct as of July 2019

When you buy contents insurance you may be able to specify whether you want new-for-old cover or not. Opting for wear-and-tear cover will cost you less than new-for-old cover, but you’ll receive less in the event of a claim and might not be able to replace all the items you need.

Don’t forget the excess

Remember that, regardless of whether you choose new-for-old or indemnity cover, there will almost always be an excess to pay in the event of a claim. The excess is the portion of any claim which you must pay yourself.

Most home insurance policies have two types of excess.

The first kind is a mandatory excess that must paid following a claim. This is typically £50 or £100, although there will usually be a higher excess of £1,000 or more for subsidence claims.

The second type of excess is a 'voluntary' excess. As the name suggests, you don’t have to include a voluntary excess, but adding one will lower the cost of your premiums, because the insurer will have to pay out less in the event of a claim.

The higher the voluntary excess, the cheaper your premium will be. However, make sure you don’t choose too big an excess otherwise you might struggle to afford to make a claim at all. 

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