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Simple English definitions for legal terms
new-for-old
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A quick definition of new-for-old:
New-for-old is a principle used in marine insurance when adjusting 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. This is done to ensure that the owner is not paid for new materials when they are only replacing old ones.
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.