These will form the basis for a settlement pay-out, according to which option is chosen. Contents insurance is usually arranged on a new-for-old basis, thereby guaranteeing that the insurer pays the full costs to repair or replace an item. However, indemnity insurance is based upon a reflective ‘wear and tear’ or depreciation value deduction in pay-out. Although indemnity policies are cheaper than new-for-old cover, they can end up being much more expensive in the long run, especially on a large claim.
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