Do you really know how new-for-old cover works?

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New for old insuranceYou might have an idea of how new-for-old contents insurance works, but just to make sure, here’s a good look at what the difference is between indemnity and new-for-old cover.

Indemnity:

You get cover for the possessions in your home just in case, heaven forbid, you should be the victim of fire, theft, flooding, falling trees or other damaging occurrences. It will generally only financially protect you against the cost of repairs to damaged items or reimburse you with the value of the product at that moment in time. This means that the insurer will take into account the age of the product, and any depreciation and deduct this from the amount you receive. So the value of that item at that point is what you will get back.

It can be difficult therefore to actually replace items like TVs, as you will receive an amount based on the item as it is – essentially second-hand. So that amount might only provide you with a lower value TV.

New-for-old:

With new-for-old policies you pay a little more so that any item that is damaged is immediately replaced with a like-for-like new product. It means that you will get a nice new TV rather than just the amount of money that the old one was worth. It doesn’t cover for upgraded or more expensive items; you will have to cover the difference yourself. With new for old cover you really need to think about everything in your house that would need replacing should you have a fire or if they were destroyed in some other way.

Don’t Undervalue

It has been estimated that 6.8million homes in the UK are under-insured, that’s 1 in 4 homes. And it’s those weird and wonderful items that you forget about that add up… garden tools, cookware and clothing are expensive to replace. Imagine having to go out and buy all your jackets, shoes, socks, jumpers, everything all over again. It would be expensive. On average £10,000!

How to add it all up

It’s important to think about the actual cost of replacing each possession in your house. With this process it is vital that you don’t undervalue items, or you could find yourself out of pocket when it comes to reinstating your house back to its former glory. The total amount that you insure for will be the limit that the insurance can pay out, even if all your possessions are destroyed.

Make sure that you really think about what it would cost to replace everything… and that means taking into account that the item will more than likely cost more now than it did when you bought it five years ago.

And finally…

You need to work out what is best for you. As with all important things in life, get advice about what’s right for your circumstances. Be realistic about the value of the items in your house and make sure that you’re paying the right amount for your possessions for the right level of cover you need.

 

Policy Expert

We carefully select the insurers on our panel for their cover levels, price and claims service; to make sure you get the best possible quality for less. What you see is what you get – no hidden excesses or excessive fees. To speak to one of our experts, call 0203 014 9300 or email ask@policyexpert.co.uk

The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.