Read our guide to new-for-old insurance to learn more about this type of home insurance coverage.
If you already have home insurance or are considering a policy, you might think insurance companies usually pay out enough money when you make a claim to replace an old item with a new one.
This is often the case if your home insurance includes a new policy for an old policy. So if you already have coverage in place, be sure to check the terms and conditions to make sure you have it. If you don’t have new coverage for the old one on your insurance policy, you probably have “indemnity coverage”.
What is compensation coverage?
Indemnity coverage is a wear and tear policy and does not go as far as what is new for old insurance coverages. For example, if you have a TV that you bought five years ago that is destroyed by fire, your indemnity coverage will pay for the current value of the TV.
So if you bought it five years ago and it cost you £ 500, you will likely receive the amount it is worth today, which could be much less given the pace of improvements to the modern televisions.
This means that if you were to go out and replace it, you might only have enough money to buy a used TV or an older model. When evaluating your claim, the insurer will take into account any wear and tear on the item. The age of the product and the current market value before paying. It may be okay for some people who are happy to pay the difference and have the item completely replaced.
But that may not be enough if you have a big claim on multiple items. Getting them all replaced could be very expensive, not to mention a lot of hassle.
Benefits of Compensation Coverage
One of the advantages of indemnity coverage is that the premiums are likely to be cheaper than if you had new coverage for old coverage on your home insurance policy. So if you are able to save on the amount you pay each month or year for your home insurance coverage, then when you need to make a claim, the relatively small payment can be supplemented with what you have saved. .
However, it is not known how much you will have to claim, because when the worst happens, whether it is a fire, theft or a flood. You cannot be fully prepared for what the damage will be. So it’s important to calculate how much it would cost to replace all of your belongings and determine which items would require a brand new replacement.
With new-for-old insurance and indemnity coverage, you will still have to pay a deductible each time you make a loss, which is an amount you agree with your insurer. So no matter what premiums you pay, you will still have to pay a little extra to make a claim.
What’s new for the old insurance?
New coverage for an old one can give you peace of mind knowing that if one of your items that you paid a lot of money for years ago is damaged beyond repair, you will receive sufficient payment for replace it with a new one or the modern equivalent.
Sometimes items that we bought years ago are taken off the market. In this case, and you must use the new insurance for the old content, you will usually receive the industry equivalent or the like. So if that high end TV you bought five years ago gets damaged and you need a new one but the manufacturer no longer makes it, you will get the money to replace it with a newer one. currently on the market.
This can be more convenient than purchasing indemnity coverage, which simply compensates you for the loss of your item, rather than replacing it. You pay a little more for the peace of mind that you can replace damaged items with new ones, but there are other downsides to new insurance for the old one that you need to be careful of.
Disadvantages of new insurance for old content
Before you start comparing home insurance policies to buy, make sure you know all about the differences and the benefits of new to old coverage and compensation coverage.
There are certain exceptions that every insurer is likely to have on a new policy for an old policy, which will prevent you from making a claim against certain items or prevent you from getting a new replacement.
These exceptions are usually only for items that you would expect insurers not to fully cover, as their lifespan is not that long anyway. This includes items like towels, bedding, and clothing.
You could still receive compensation on these claims, but not necessarily enough to get a brand new replacement.
Things to remember about the new for the old insurance coverage
When you start to compare home insurance policies, always check what the new for the old policy will cover and what it will not cover. If you ever need to make a claim, it would be difficult to deal with the fact that the item you need to replace is not covered by your insurance, so always check that out.
If you decide to take new coverage for an old one, you can try to lower your premiums by including a “voluntary deductible”. If you choose to pay a higher deductible, the premiums you have to pay will be reduced because the insurer has less to pay when you make a claim.
Remember, when comparing home insurance, choose a policy that gives you the right level of coverage, which isn’t necessarily the cheapest. It is important to first protect your home and property at the level that is best for you. Then, once you find a coverage reference that you are happy with, try to find the best value on the market.
Also decide if any of the added extras are really useful to you in the long run. You may never make a claim on your insurance or make multiple claims – your policy should always represent good value anyway, so weigh it before you buy.
Exceptions for the new or old insurance policy
There are some exceptions to the new policy for the old policy. Items, such as curtains, bedding, and clothing, are usually not included as they are considered to be less durable.