Whilst the term “new for old” is regularly used when speaking about insurance cover there are other types of policy. Many travel policies for example, now only provide replacement on an indemnity basis that specifically replace the item assessed on its worth and condition at the time of incident, effectively a second-hand value. It is important to check what type of cover your policy provides and advise your jeweller or valuer when requesting pre or post loss documentation.

Many policyholders and insurance companies alike assume that everything will have a “new equivalent”, however, as many retailers know this is often not the case. It can sometimes be difficult for the valuer to try and balance the client’s/retailer’s quote on something they may believe is equivalent, versus what may over-step the boundary of what the insurance company or their representative consider an acceptable level of betterment – even if it carries the same family, collection and/or brand name.

Overstating betterment beyond an acceptable level is usually referred to as “uplifting”, something the insurance company and Financial Ombudsmen Service consider as fraudulent.

To help choose the right policy the policyholder must ask themselves, what do I want my insurance company to provide in the event of serious damage, loss or theft? 

Serious damage

If a watch is damaged, found to be uneconomically viable to repair, or indeed unable to be repaired at all, the insurance company reserves the right to insist on the most cost-effective option. This could even end up with you being offered a modern replacement item.

It is usual for condition and maintenance history to also be considered. The insurance company will generally only pay to rectify what was directly affected by the incident (the insured peril) and will request this to be confirmed by way of an official estimate provided by an approved repairer, usually the brand’s own service centre. In this scenario the policyholder may be expected to cover any shortfall out of their own pocket to repair/restore any aspects attributed to wear and tear, eg rebuild/replacement of a worn bracelet and/or customisation.

Occasionally an item may only be compensated for at scrap/open market value when serious condition issues and lack of maintenance are discovered. In exceptional circumstances an insurance company may even repudiate (decline liability) if following validation it is decided the item was not “fit for purpose” due to the condition, and it was being put at a greater but unnecessary risk due to the lack of maintenance, effectively regarded as a breach of duty of care and negligence on the part of the policyholder.

Loss or theft

If the item is lost or stolen and no longer manufactured, or does not have a current equivalent of like-for-like construction, metal quality and/or stone size/quality, the policyholder may simply elect to choose a suitable new replacement to the value of the insurance company’s liability.

This is usually the cost to replace at the time of loss and not necessarily the sum insured. Generally an insurance company would not object were the policyholder to express a wish to contribute toward upgrading the item to a superior metal quality etc, eg pay toward having an 18ct gold model to replace an obsolete 9ct piece. Alternatively the policyholder may prefer to request/source replacement from the most appropriate second-hand market, be it from their local jeweller, a reputable dealer or auction house.

This may be more suitable when the policyholder prefers the aesthetics or mechanics of the original item compared to modern styles and movements or had a customised item no longer regarded as genuine by the brand/official agent. It is recommended you speak with your insurance company or broker beforehand to check the type of policy you may have or that is being offered.

Your preferred Institute Registered Valuer will be happy to discuss the level of value that may be most appropriate for your item and help clarify the differences between New Replacement, New for Old Replacement and Second-Hand Replacement.