What is new for old contents insurance?

If you’re looking to take out a home and contents insurance policy, you may have come across the term ‘new for old’ replacement insurance.

New for old contents insurance, also known as replacement cost coverage, is a type of insurance policy that covers the replacement or repair of damaged or stolen items with its brand new equivalent, regardless of the age or condition of the original items.

Most contents insurance policies also provide new for old cover that helps you replace lost or damaged items with new products of equivalent value. Let’s explore how new for old contents insurance works.

How does new for old contents insurance cover work?

As contents insurance covers the cost of repairing, rebuilding or replacing your belongings if they’re damaged, it’s crucial that the payout you may receive can go towards replacing the damaged or stolen item with a new one.

However, it does not typically include an upgrade to the top-of-the-line replacement. This means you cannot expect to be upgraded to an iPhone 15 if your iPhone 12 is damaged or stolen, for example. Also, insurers may not include contents that have shorter life spans, such as clothing. 

The benefits of new for old contents insurance

One of the biggest advantages of new for old contents insurance is that it protects you against depreciation. 

Suppose that your couch, which is currently valued at $1,500, is destroyed by water damage. In this instance, with new for old contents insurance you’d be able to replace it with an equivalent model or one that closely matches its specifications. 

Other policies may instead see an insurer offer you the value of your stolen or damaged belongings at the time that you make a claim. For example, that same couch may be currently valued at $750, so the insurer would instead pay you $750. However, you know that it may cost more to buy an equivalent model nowadays, so you’ll be out-of-pocket trying to replace your couch with a newer version of the one you had.

Additionally, choosing new for old contents insurance may save you time, as well as money, as you will not need to spend your weekends trawling second hand markets to find an equivalent couch for less than you paid originally.

This is why a new for old policy can be a competitive option to consider adding to your contents insurance. 

The risks of new and old contents insurance

It’s worth noting that some insurers may charge you a higher premium for the benefit of having new and old contents insurance. Be sure to carefully compare the cost of different policies before signing on the dotted line.

Also, most contents insurance will not include cover for accidental damage. If you have younger children this may be worth keeping in mind, as your contents insurance may not cover replacing a stained couch, for example. There may also be specific restrictions around what the insurer will and will not cover as well, including damage to laptops and computers.  

As with all insurance policies, be sure to check which events are and are not covered by your insurer, such as storm damage, flooding and bushfires. If you’re planning to take out a new home and contents policy, or considering renewing your existing 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. It’s also worth comparing quotes from multiple insurers to ensure you get the maximum coverage at a competitive price.

Also, it may be worthwhile taking the time to calculate the cost of replacing all your belongings so that you can avoid underinsurance. You’ll sleep better at night knowing that your insurance policy will be able to replace everything if needed. 

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