Out with the Old in with the New
Have you ever heard the term “New for Old” as it relates to household insurance? It is a standard phrase with many contents insurance and home insurance policies and requires investigating if you are in the market to purchase or upgrade an existing policy.
So what is “New-for-Old”? It simply means that if something in your home and on your policy is destroyed through fire, theft or another standard mishap, the item will be replaced with a new item. The “Old” refers to the item you lost; the “New” is what you will receive from the insurance company.
You may wonder why this is an issue; typically, it is not. Many companies include “New-for-Old” clauses in their policies. However, it should not be assumed that all companies include it in their standard guidelines. It is important to speak with your insurer about this option, if it is available, if there is extra cost and what it does and does not cover.
You may wonder why this type of contents insurance is an issue. On other policies, items are replaced based on the date they were purchased, condition at the time of the incident and current market value. Be aware that the term “current market value” means what the item would be worth if you sold it on the open market, NOT what you would pay if you were going to have it replaced.
Again, speak with an insurer before deciding if “New-for-Old” is the right thing for you.
