Difference between *new for old* and *market value* insurance

The primary difference between *new for old* and *market value* insurance lies in how they calculate the payout for an insured item in the event of a claim. Here’s a breakdown of each:

New for Old Insurance

Definition – This type of insurance policy replaces the damaged or lost item with a brand-new equivalent
Payout – The payout amount is based on the current cost of purchasing a new replacement item.*
Advantages – The insured person ends up with a new item, which can be advantageous if the lost or damaged item has significantly depreciated.
Cost – Generally, *new for old* policies have higher premiums since they cover the full replacement cost of a brand-new item.

Market Value Insurance

Definition – Market value insurance, , covers the item’s value at the time of the loss, taking depreciation into account.
Payout – The payout is based on the item’s current market value or resale value, not its original or replacement cost. If you have a five-year-old caravan, the market value payout would be based on what that specific caravan would sell for today, which would likely be much less than the cost of a new caravan.
Advantages – Market value insurance often comes with lower premiums, as the insurance company considers depreciation.
Cost – Premiums are generally lower since the coverage only extends to the depreciated, current market value of the insured items.

In Summary:

• New for Old: Higher premiums, replaces with a new item at current retail value.* This could also be subject to limits within the policy.
• Market Value: Lower premiums, pays the depreciated value of the item at the time of the claim.

Choosing between these options depends on your preference for higher coverage (new for old) versus a lower cost of insurance (market value).

*The above maybe subject to T&C’s within specific policy wordings.