CII Certificate in Insurance - Insurance, Legal and Regulatory (IF1) Practice Test 2025 - Free IF1 Practice Questions and Study Guide

When insurance is provided on a "new for old" basis, it means that the insured will receive compensation to replace the stolen item with a new equivalent, rather than being compensated for the actual cash value or original purchase price. This type of coverage is designed to ensure that the policyholder can replace an item with a similar, brand-new item, effectively restoring their situation to what it would have been if the loss had not occurred.

In this scenario, Lawrie will receive the current replacement cost of the television, which reflects the amount necessary to purchase a new television of similar kind and quality. This approach provides a more equitable outcome for the insured, as it accounts for the depreciation and changes in value that naturally occur over time, instead of just reimbursing based on what was originally paid or under a depreciation model.

In contrast, the other options suggest deducting the original purchase price or applying an allowance for wear and tear. However, since the coverage is specifically on a new for old basis, such deductions would not apply, thus confirming that Lawrie's compensation will be the full current replacement cost without adjustments for depreciation.