New for old insurance, also known as replacement value insurance, is a common type of contents insurance. But what exactly is new for old contents insurance?
What is new for old insurance?
New for old insurance replaces your old item, regardless of age, with a new equivalent one.
For example, if your TV was worth $1000 when you purchased it five years ago, today, it’d be worth a lot less. Items depreciate over time and wear and tear take further value off the item. If you were to sell it, you wouldn't be able to get back the $1000 you paid.
But with new for old insurance, if your TV was stolen or damaged beyond repair, it would get replaced with a brand new equivalent one. Regardless of how old your TV was, or any wear and tear.
That doesn't mean you will get exactly $1000 for a new TV, but enough to get a new item that is similar. If you had a 32" middle of the line smart TV, you would get a new, 32" middle of the line smart TV. Depending on availability that may be the exact same model, or it may be the closest available one.
What are the other options?
The other main type of insurance has a variety of names, such as indemnity, market value or present value cover. This type of cover will only cover you for what the item was worth at the time it was stolen or damaged. The retail value minus the depreciation of the item along with any wear and tear.
In the example of the TV above, your TV would not be valued at the $1000 retail price. It would take into account the age of the TV, plus any wear and tear. In this case, you may find you are only covered for a few hundred dollars.
Think if you were to list the item on TradeMe, how much would it sell for? That's roughly what you'd be looking at in terms of cover.
Why should I get new for old insurance?
The main reason to get this type of cover is that it protects against depreciation. Even though your TV is no longer worth the $1000 you paid, you can get another, new TV of a similar value. If you don't have this cover, the payment you receive may not be enough to cover a replacement. If you only receive a few hundred dollars for your TV, can you really buy another one for this amount? You may find yourself having to buy items of lower quality or shopping second-hand.
What else should I know?
Beware the premiums
New for old insurance is much more comprehensive and, as a result, more expensive than present value cover.
This is why some people opt for present value cover. Even though it probably won't fully cover them in the event they need to replace their contents, the premiums are significantly cheaper, so it's a more affordable option. And the payout will still help ease the financial burden of any loss.
In reality, most contents insurance policies will include a mix of cover. This is usually made up of predominantly new for old cover, with certain items replaced at present value.
Know your policy
Every policy is different. Know your policy, so you know what you are covered for. Even if you have new for old cover, there is likely to be exclusions and restrictions. Don't get caught out.
Sweat the small stuff
When calculating how much contents insurance you need, think of everything. All the little costs that add up, not just your big items. That includes your kitchen utensils and appliances, furnishings, bedding and linen.
Additionally, unless your policy is providing cover specifically for the present value of your items, you need to calculate not the cost of your items, but the cost to replace them in the present-day market.
Don't expect any free upgrades (necessarily)
If your old 32" HDTV TV is stolen, don't expect to have it replaced by a new 60" 8K QLED TV. New for old is for equivalent items.
However, the replacement items do need to be new and, depending on the age of your items and the availability of replacements, an upgrade of sorts is possible.
If you have an iPhone 6, you aren't going to receive an iPhone 17 Pro Max as a replacement, but you may get an upgrade to some degree. Because, simply, you can't buy an iPhone 6 anymore.
This is a general rule, so be sure to check with your policy provider. Don't just insure your old items under the assumption you'll get better ones should you need to make a claim. Many providers exclude items that incur high amounts of wear or depreciate quickly from new for old cover to avoid this issue.
Common exemptions
As mentioned above, many policies have exemptions. Usually, these are on household items that are particularly prone to wear and tear, or have shorter life spans, such as bedding, linen, clothing and footwear. It can also include sports equipment such as bicycles. Be sure to check for a full list of exclusions from your policy provider.
There can also be exemptions around the cause for the claim. Heavy rains and a burst pipe can both flood your house and destroy valuable contents. But your policy provider may not cover for both. Accidental damage may also be excluded, so if you break your TV unintentionally, your claim might be rejected.
Look carefully at what type of cover you are purchasing. In some cases, you may have to pay extra for add-ons.
Get specific
When making a claim, you may need to provide evidence that you own the items for which you're claiming. The more information the better: think receipts, photos, serial numbers, etc.
Do note that most policies have limits on certain items and require you to mention these specifically. If you have a $10,000 ring, your provider isn't going to happily replace it just because you have a photo of it. You need to mention it (and any other high-value items) when taking out your policy. It's quite possible that you will need extra cover for these certain high-value items.
Always check with your insurer and read the terms and conditions of your policy carefully.