Content insurance covers the household items and personal belongings in your home in case they are lost, damaged, or stolen. If you own your house, it’s possible to couple your home or building insurance with your contents policy, which is often cheaper than taking out two separate policies.
Getting the right home and contents insurance cover
Home and contents insurance covers the cost of repairing, rebuilding or replacing your house and your belongings if they’re damaged. That’s why it is vital to accurately calculate your belongings’ value and the cost of rebuilding your house before deciding on the policy. Most contents insurance policies also provide new for old cover that helps you replace lost or damaged items with new products of equivalent value.
How does new for old insurance cover work?
New for old cover offers you the replacement value of your damaged belongings at the time of insurance. Suppose that your microwave, which is currently valued at $100, is destroyed in a fire. In that case, with new for old contents insurance, you’d be able to replace it with an equivalent model or one that closely matches its specifications.
Simply put, new for old home insurance covers the replacement of a product despite its age. You may receive:
- A brand new, equivalent product to replace the item that’s stolen, lost or damaged.
- A replacement of comparable value if the damaged product is no longer available.
It’s also worth noting that new for old insurance cover only replaces the damaged goods up to their value at the time of insurance. So, you cannot expect to be upgraded to an iPhone 12 if your iPhone 6 is destroyed in a fire.
Why should you consider new for old contents insurance?
One of the primary reasons why new for old contents insurance is a good idea is that it protects you against depreciation. For instance, your refrigerator was worth $2000 when you purchased it five years ago. Today, it’d fetch you much less if you put it up in a second-hand goods sale because most items depreciate over time.
Without new for old contents cover if your refrigerator is damaged due to flooding, its present value is what you’d get back from the insurer. But, if you have new for old contents insurance, you’ll be able to replace your refrigerator with a new one equivalent to the amount it was insured for. Rather than accepting a lower payout amount due to depreciation, you’ll get the full $2000 if that’s what you insured it for.
The difference between new for old contents insurance and indemnity insurance
New for old cover is not the same as indemnity insurance or a wear and tear policy. While new for old replaces your damaged goods with new equivalent value products. Indemnity policies take depreciation into account, replacing items at their current second-hand value. Not surprisingly, new for old contents insurance is generally more expensive as compared to indemnity cover. However, there are certain exceptions to new for old contents insurance cover. These include clothing, curtains and bed linen that are less durable and the payout for such things is mostly reduced to allow for wear and tear.
If you’re planning to renew your home and contents policy, make sure to read the fine print to check what’s covered. Most contents insurance policies are based on new for old cover, but there are often some exceptions. Additionally, it’s better to work out the cost of replacing all your belongings so that you know your cover will be able to replace everything if needed. It’s also worth comparing quotes from multiple insurers to ensure you get the maximum coverage at a competitive price.