A more thorough explanation:

Definition: New-for-old is a principle used in marine insurance to adjust a partial loss. It means that the value of old materials is deducted from the total repair expenses, and then one-third of the cost of repairs is charged against the insured shipowner.

Example: If a ship's engine is damaged and needs to be replaced, the new-for-old principle would apply. The insurance company would deduct the value of the old engine from the cost of the new engine, and then charge one-third of the remaining cost to the shipowner.

Explanation: The new-for-old principle is used to ensure that the insured party is not overcompensated for a loss. By deducting the value of old materials from the cost of new materials, the insurance company is only paying for the difference between the two. The one-third deduction is meant to account for the fact that the new materials will likely have a longer lifespan than the old materials, and therefore the insured party should bear some of the cost of the upgrade.