Inflation Guard Endorsement

What Does Inflation Guard Endorsement Mean?

An inflation guard endorsement is an option in home insurance policies that gradually increases the coverage limit over time. This adjustment helps account for the rising costs of rebuilding the insured dwelling, ensuring that the coverage reflects the projected increase in construction costs, which are typically higher than the original purchase price of the home.

Insuranceopedia Explains Inflation Guard Endorsement

Inflation can drive up the cost of rebuilding a home, potentially exceeding the original purchase price. To protect against underinsurance, homeowners can opt for an inflation guard endorsement alongside their home insurance. This endorsement gradually increases the coverage, adding a percentage over time, such as 5 percent after three months of the policy’s effectiveness. It is recommended that the insured consult with their broker about how inflation may impact rebuilding costs and their coverage before purchasing this endorsement. This will help avoid overpaying for premiums or being underinsured.