Superquote Glossary: New For Old

Insurance contracts are based on the principle of restoring the insured to their previous status.  This means that it is not the intention of the provider to be able to make the insured 'better off' following a claim.

This means that generally an insurer will settle a claim after taking an amount of depreciation into mind.  Nowhere is this more evident than in car insurance where rather than buying a new car, an insurer will pay the market value of the vehicle unless an agreed valuation has been made.  The only other exception in car insurance is when a replacement car element of the policy means that an insurer will replace the car with a brand new vehicle if the car is a total loss within a set period of time (normally 1 / 2 years)

New for old normally applies to home insurance contracts and essentially means that items will be replaced with new items in the event of a claim.  This effects the calculation of the sum insured for the policyholder.  For example, a toaster may cost £30 new but £10 second hand.  If, like the vast majority of house isnurance policies, the policyholder has a new for old policy, he needs to caluclate the sum insured based on the £30 level.