When you take out static or touring caravan insurance you will be asked to choose a type of cover, ‘New for Old’ or ‘Market Value’, but how do you know which is right for you?  We have seen caravans increasing in value over the last few years, so it has never been more important to check you are insured for the correct amount. 

In this article we explain the difference between the two, how they impact on the cost of insurance, and how they affect the settlement received following a total loss claim.

What is New for Old cover?

If your caravan is insured on a New for Old basis and it is damaged beyond repair, or stolen, your claim settlement figure will be calculated based on a like-for-like, brand-new equivalent caravan.

However, (this is the important bit), to be covered on a New for Old basis, you MUST insure your caravan for the cost of a brand-new equivalent model, not its current value. To ensure the amount you have declared as the sum insured continues to be the same as a brand-new equivalent caravan, the sum insured must be reviewed every year.  Your caravan dealer or site will generally be able to provide you with an accurate figure.

What is Market Value cover?

If you choose to insure your caravan on a Market Value basis, you are covered for the amount it is worth in terms of its resale value.  If it’s stolen and not recovered, or damaged beyond repair and declared a total loss, you will be given the Market Value of the caravan at the time that the loss occurred (approximately what your caravan would have been worth if you had sold it prior to the damage occurring).  This amount will be similar to the figure listed against the model in the Glass’s Guide.

What are the main differences between the two?

New For Old cover will enable you to replace your caravan with a brand-new equivalent in the event of a total loss claim.  You must, however, insure the value of your caravan as if it were brand-new and therefore your premium will be higher.

Market Value cover will enable you to replace your caravan with a caravan of the same age and in a similar condition to your caravan prior to any damage occurring.  You insure your caravan at the amount it would be worth if you were to sell it and therefore your premium will be low

Will New for Old cover affect my renewal cost?

If you are currently insured on a New for Old basis and you are approaching your renewal date, you must find out the brand-new replacement price of your caravan to be certain it is insured at the correct value.  In the event of a total loss claim, you want to be sure your settlement is sufficient to replace your caravan with the brand-new equivalent. 

Under Insurance This is often referred to as ‘average’. If your caravan is insured for a lower value than the brand-new equivalent (New For Old cover) or lower than the market value (Market Value cover), in the event of a claim (not only total loss claims), the settlement figure may be reduced by the percentage of the underinsurance.  

Eg:

New For Old policy

Sum insured – £25,000

Brand-new replacement price £50,000

You are insuring for half of its value and may only get half the amount of any claim.

Total Loss Claim £25,000 – 50% = £12,500

Or

Market Value policy

Sum insured – £8,000

Correct Caravan value £10,000

The caravan is 20% under insured. Claim for a damaged side panel £1,925. Repair settlement £1,925 minus 20% = £1,540 leaving a shortfall of £385.