New for Old
An insurance policy provision that allows the insured to receive payment for the full replacement cost of damaged or destroyed property without deduction for depreciation or wear and tear. The policyholder receives enough money to buy a new item equivalent to the original, regardless of the item's age at the time of loss.
Example
“Thanks to her new for old coverage, Janet received $1,500 to replace her five-year-old laptop that was destroyed in a fire, even though its depreciated value was only $600.”
Memory Tip
Remember 'NEW replaces OLD' - you get money for a brand new item even if your old one was well-used.
Why It Matters
New for old coverage ensures you can actually afford to replace your belongings after a loss, rather than being left with insufficient funds due to depreciation. This protection maintains your standard of living and prevents out-of-pocket expenses after already suffering a loss.
Common Misconception
Some people think new for old coverage means they'll automatically receive a newer or better model than what they lost, but the coverage typically provides replacement with items of similar kind and quality. You get equivalent replacement value, not an upgrade opportunity.
In Practice
Mike's three-year-old refrigerator worth $1,200 new is damaged beyond repair in a kitchen fire. Under actual cash value coverage, he would receive about $800 after depreciation, leaving him $400-500 short of buying a comparable new refrigerator. With new for old coverage, he receives the full $1,200 replacement cost, allowing him to purchase a similar new refrigerator without additional out-of-pocket expense. The insurer pays the extra $400 that depreciation would have reduced from his settlement.
Etymology
A straightforward descriptive phrase that emerged in property insurance to distinguish this coverage type from depreciated value settlements, emphasizing the exchange of old damaged items for new replacements.
Common Misspellings
Compare insurance quotes and save
Related Terms
More in insurance
Other insurance terms you should know
See Also
Need help with spelling?
Instant spelling checker with dialect variants for 2,000+ words.