New for old contents insurance

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What does it mean when your contents insurance provides new for old replacement of contents? Read on to find out.

When you’re shopping around for a home and contents insurance policy, making sense of all the insurance terminology and technical jargon can be a frustrating and confusing process. One of the terms you’ll come across when comparing policies is new for old contents insurance or new for old contents cover. Let’s take a closer look at exactly what this means.

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Details Features
Contents Insurance
Contents Insurance
Protect your possessions in the event of theft or natural disaster. Get a 15% discount when you purchase cover online
  • Cover for household contents
  • Cover for contents away from the insured address
  • Cover for fire, explosion, theft, malicious damage and more
  • Choice of lump sum or instalment payments
Go to site More info
Comprehensive Contents Insurance
Comprehensive Contents Insurance
Save up to 30% when you purchase a combined Woolworths Home and Contents policy online. Cover must be purchased prior to 28 February 2018.
  • $8,000 outdoor contents cover
  • $5,000 home contents cover
  • $1,000 food spoilage cover
  • $2,000 electrical motor burnout cover (optional)
Go to site More info
Contents Insurance
Contents Insurance
Save up to 20% on your contents insurance when you insure a car and your home contents at the same address
  • Cover for loss or damage by theft, attempted theft
  • Storm, including lightning, wind, hail and snow cover
  • Optional tools of trade cover up to $5,000
  • Optional accidental damage cover up to $5,000
Go to site More info

What is new for old cover?

New for old cover essentially means that if your personal belongings are damaged beyond repair or stolen and not recovered, your policy will cover the cost of new equivalent items to replace them.

It is a term commonly used across a range of insurance policies, but most commonly in home and contents and car insurance cover. This cover applies regardless of how old and well-used the original item may have been.

However, don’t assume that this means you’ll be upgraded to a new and improved model as your policy only covers a new equivalent item.

So if your 10-year-old Windows XP desktop computer is destroyed in a fire, your policy won’t cover the cost of replacing it with a new, top-of-the-line model. Instead, you’ll be able to replace it with a new model that most closely mirrors its specifications.

Why do I need new for old insurance?

There are several reasons why new for old contents insurance is a great idea but the biggest advantage is that it protects you against depreciation.

For example, while your 60-inch plasma TV might have been worth $3,000 when you bought it five years ago, its current market value will probably be a whole lot less. But if your policy doesn’t have new for old contents cover, its current market value would be what you’d get back from an insurance claim.

Having new for old contents insurance means you can replace damaged and stolen items with new ones, rather than receiving a reduced payout that could see you browsing through second-hand stores and pawn shops to find affordable replacement items. In other words, with new for old cover, you’ll be able to buy a new 60-inch plasma TV to replace the old one that was destroyed.

New for old insurance gives you the peace of mind that comes with knowing that if something does go wrong, your insurer will be able to restore you back to your previous position. That’s why it’s an important feature to look for when comparing contents insurance policies.

What does new for old typically cover me for?

New for old contents insurance covers:

  • A new equivalent item to replace an old item that has been lost, stolen or damaged
  • Replacement of an item regardless of its age
  • An equivalent replacement if the lost, stolen or damaged item is no longer available

However, it does not cover:

  • An upgrade to a top-of-the line replacement
  • Some items that have a shorter life span, such as clothing and bedding

What’s the difference between new for old and indemnity insurance?

While new for old replacement cover is an increasingly common feature of contents insurance policies, some other policies provide what is known as indemnity cover or replacement value cover. There are a few key differences between the two cover types as outlined in the table below.

New for old insuranceIndemnity insurance (also known as replacement value cover)
Replaces your belongings with new itemsCovers the value of your belongings
Provides a replacement item when a personal belonging is stolen or damaged beyond repairPays a benefit to replace the lost item
Provides a new equivalent replacementBenefit calculated based on current market value of item
Does not take wear and tear into accountTakes wear and tear into account
More expensive premiumsCheaper premiums

Are there any disadvantages to new for old insurance?

Despite its many benefits, new for old insurance does have a few drawbacks. For one, due to the higher level of cover provided, premiums are more expensive on new for old contents insurance than they are on indemnity cover contents insurance.

You should also be aware that new for old cover typically isn’t available for all items. Items that are prone to wear and tear and therefore have a shorter lifespan, including clothes, linen and bedding, may only be protected by indemnity cover. Always read the PDS to find out what is and isn’t covered by a policy.

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William Eve

Will is a personal finance writer for finder.com.au specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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