Home Insurance Indemnity Cover

If you move in insurance circles, you’ll have heard the buzz words ‘indemnity’ and ‘new for old’. But for most of us, all we want to do is find the right quote, pay for the cover and enjoy a claim-free year knowing our home and its contents are protected. But, what does indemnity mean and how will it affect you and your family if you have to make a claim?

Indemnity means that the underwriter knows and appreciates that your possessions have been used by you, that they do have some amount of wear-and-tear and, should you need to replace these items under the terms of your insurance, they will value your items to allow for this depreciation. In other words, it's the second-hand or current value of your items that is used when you come to reach a settlement regarding replacements.

This kind of cover is very different from new-for-old cover and of course it is a cheaper option. However, this could cause problems if you need to claim as you certainly won’t be able to buy brand new items to replace your old ones unless you pay a contribution out of your own pocket.

While there are a few underwriters who offer indemnity cover for home contents, most standard policies will cover you on a new for old basis. It’s worth paying a little extra on your premium for new for old cover because, although many of us naively think it won’t happen to us, you simply can’t plan for the unexpected so it’s best to be prepared for the worst. Buying an annual home contents policy that covers your home furnishings, internal fittings, electrical items and white goods on an indemnity basis may just leave you significantly out of pocket; do you really fancy trawling the second-hand shops to replace your valuable appliances and those items you simply can’t live without?

When shopping for home contents insurance for the first time, or when renewing your existing policy, consider whether you want the cost of any wear and tear to be deducted from a claim. If you don’t then make sure you buy insurance that provides new-for-old cover.

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