Under a 'new for old' insurance policy, if a claim is settled by payment, what can the insured do with the money?

A 'new for old' insurance policy is designed to replace damaged or destroyed items with new ones of similar kind and quality, regardless of the item's actual depreciated value. When a claim is settled by payment under this type of policy, the insured has specific rights regarding the settlement funds.

The correct choice allows the insured to use the money for the purpose of reinstating the property or settling otherwise. This means that the insured can either purchase a new item of the same kind or make necessary repairs to restore the original property to its former condition. This option aligns with the fundamental principle of insurance, which aims to restore the insured to their previous position without providing a profit from the loss.

Using the funds to reinstate or make necessary repairs helps to ensure that the insured remains protected and that the insurance policy fulfills its intended purpose, which is to provide compensation for the loss experienced.

The other choices do not appropriately reflect the obligations and intentions established by 'new for old' policies, as simply keeping the money or returning it to the insurer does not promote the restoration of the property, which is the primary goal of the insurance coverage in this context.