New for old — until you claim.
You bought the policy on a reinstatement basis: destroyed equipment and buildings replaced as new, not paid out at their worn-down value. Then the loss happens, and the first offer on the table is the depreciated figure. The full amount, you are told, comes later — if you rebuild in time, with the right thing, and without "bettering" yourself along the way.
How a new-for-old claim ends up paid old-for-old
Reinstatement cover is a promise to put you back with new. But almost every reinstatement wording pays that promise in two steps. First the indemnity value — what the lost item was worth second-hand, after depreciation. The uplift to new-for-old is paid only once you have actually spent the money on the replacement, and only if you have met the conditions attached.
That is where claims shrink. Not because the cover was wrong, but because the conditions on the uplift are read strictly, and the business is under pressure to accept what is offered and move on.
A worked example:
- The loss. A fire destroys a twelve-year-old production line. The policy is on a reinstatement basis with a sum insured of US$800,000, roughly the cost of replacing the line new.
- The first offer. The insurer offers the indemnity value: around US$280,000 after depreciation. The balance is "available once reinstatement is complete".
- The betterment argument. The old model is no longer made. The current equivalent is faster and has more capacity. The insurer proposes a betterment deduction of US$120,000 for the improvement.
- The clock. Permits and lead times push the replacement past the policy's time limit for reinstatement. The insurer says the uplift has lapsed and the indemnity value is the final figure.
A US$800,000 promise, paid at US$280,000. Every step was argued from the wording; none of it was inevitable.
Where the number gets cut
- Indemnity first. The opening offer is the depreciated value, presented as the settlement rather than the first instalment it actually is.
- Betterment. Any way in which the replacement is better than what was lost is priced and deducted — even where no equivalent of the old item exists.
- Time limits. Reinstatement must start, or finish, within a stated period or "a reasonable time". Delays outside your control are used to argue the uplift has gone.
- "Same site, same kind." Rebuilding elsewhere, or with a different layout or process, is treated as outside the cover.
- Average on the reinstatement value. If the sum insured is below the cost of replacing everything new, the whole claim is scaled down — often by more than the business expects.
What protects you
- Read the basis of settlement before you accept anything. On a reinstatement wording, new for old is the contract, not a concession. The indemnity figure is a payment on account.
- Betterment has limits. If the old item is no longer made, the modern equivalent is reinstatement. A deduction only holds where you have chosen something genuinely better than you needed.
- Put your intention to reinstate in writing early. Then keep the insurer informed of every step. Time limits are routinely extended when the insurer has agreed in writing — and almost never when it has not.
- Ask for interim payments. You should not have to fund the rebuild out of cash flow while the insurer holds the uplift.
- Check what the wording actually says. Many policies allow rebuilding on another site, or in a different form, provided the insurer's liability is not increased. Others carry day-one or escalation clauses that protect you against inflation in the sum insured.
Being paid old-for-old on a new-for-old policy?
If the first offer is the indemnity value, a betterment deduction has appeared, or you are being told the reinstatement window has closed — the first look is free and confidential. The uplift is usually recoverable when the claim is run properly from the start.