New-for-old home and contents cover

A new-for-old replacement policy, as opposed to a market-value replacement policy of the current assets you own, could save you thousands of dollars in the event of a claim. But many insurers do not cover new-for-old, particularly for large assets such as homes. Here’s how to check whether your policy has you adequately covered.

Check the fine print

Any information on insurance policies available in Australia should include a product disclosure policy booklet, which outlines everything the policy does and, importantly, does not cover. It can also provide information on additional benefits that are optional to the policy.

Some insurance policies will include new-for-old cover on all contents, without any depreciation. That means if you have insured a three-year-old computer, it will not be rated at its current value (which, in computer years would be very little) but, instead, at the cost of replacing it with new equipment. The same applies to other items in the home, including furniture.

There are many items, however, that have strict limits on replacement value. These include works of art, jewellery, DVDs and CDs, the replacement of important documents, such as passports and bonds, and tools of trade keep inside the home. It is possible to arrange for some of these items to have an increased insurance value, so it is important to make sure your valuations are accurate before insuring property and assets.

New homes

For the property itself, new-for-old replacement is generally associated with repairs or replacement to damage, not necessarily to replace the whole dwelling. Again, there are exceptions to this, rare as they are, but these are mainly associated with dwellings that are less than 12 months old. In this case, it is important to ensure that any new house is covered by a builder’s warranty, which is another type of insurance altogether, and is the responsibility of the builder. Importantly, beware of the clause that states repairs or replacement with be at “reasonable cost”. If a dispute arises, the Insurance Ombudsman Service may be able to help.

The type of damage that can be covered by an insurance policy may include:

• Earthquakes
• Explosions
• Fire
• Ceramic, glass or sanitary fixtures
• Impact damage from flying or falling debris
• Lightning
• Oil leaks / oil escaping
• Riots, civil disturbances, political or industrial disturbances
• Storm damage
• Theft

Exclusions

Some loss, damage, injury or death that occurs as a result of the following, may also not be covered:

• Wear, tear, rust, corrosion
• Depreciation (home)
• The sea, high water or tidal waves
• Storm surge (increase in sea levels due to storms)
• Vermin, such as rats or pigeons
• Atmospheric conditions or extreme temperatures
• Subsidence or landslides

This list is usually extensive in any policy, so again, check the booklet closely. Being aware of your responsibilities may help you in the case of making a claim. It may also help you decide what assets need additional protection.