What Is Inflation Guard Endorsement on Your Home Insurance?
Understanding the specific terms of home insurance is important. Some policies offer inflation guard. This is a type of endorsement, or add-on, to your plan. In many areas, it is very valuable.
The goal of insurance is to protect you from financial loss. Most policies are static. That is, their value and coverage level do not change. However, the value of your home does. The cost to replace it does, and it often increases. For these reasons, you may need this special inflation endorsement on your plan.
Inflation can be good or bad. Most often, homeowners want to see the value of their home rise as inflation rises. That means the home is worth more. Over time, this can lead to a larger sale price. However, inflation also means it costs more to rebuild your home. This is where concerns arise.
Let’s say you purchased a policy five years ago. You did not update it regularly. Over the last few years, the cost of rebuilding a home has increased. Your policy still only provides the original level of coverage. This means your might not have enough insurance value to pay for the total cost to rebuild. What would you do?
How This Endorsement Works
Inflation guard insurance helps you rebuild your home when necessary. Each policy is a bit different. However, most if these policies will see the value automatically increase yearly. Generally, it grows at the same rate as inflation does. Most of the time, this type of insurance has a lower premium.
In some situations, this type of coverage is mandatory. It may already be a part of your existing home insurance policy and premium. It is often built into your policy in some areas. If your replacement cost coverage has a liability limit of less than $1.5 million, then this coverage may be mandatory. In other situations, it just makes sense to be on the policy. In some areas, the cost to rebuild is rising quickly. Without this coverage, you may not be able to protect your home.
Inflation guard is an endorsement to ask your agent about. It helps enhance your home insurance policy. It helps give you peace of mind. If a significant incident where to occur, it can help fill in the gaps left in your coverage. A fire, for example, could lead to a full rebuild. Without this coverage, you may have limited protection in these situations.