What is an Inflation Guard Endorsement?

Endorsement of the Inflation Guard

The Inflation Guard Endorsement is a quarterly option that increases insurance coverage under the policy by a percentage of the original face amount. The insured can choose a quarterly percentage increase in insurance (for example, 1%, 2%, or 3%), with the premium for the endorsement varying according to the percentage increase chosen. The endorsement's objective is to assist the insured in meeting the replacement cost condition's requirements and to protect against underinsurance caused by inflation and rising building costs. The rise affects not just the building but also other types of insurance.

Cost of Replacement Guaranteed

Some insurers provide the most appealing method to guaranteed replacement cost coverage for the home. Additional Limits of Liability for Coverage A, B, C, and D is the usual ISO endorsement for this coverage (HO 04 11). The endorsement states that any additions or upgrades to the home that increase the replacement cost by more than 5% must be reported to the insurer within 30 days after completion. Even if the cost of repairing or replacing the residence exceeds the maximum for coverage A specified in the declarations, the insurer agrees to pay for it. In effect, the most for Coverage A is raised retroactively to match the building's current replacement cost. As the coverage A limit grows, the same percentage increases the coverage B, C, and D limitations. The premium is also raised to reflect the increased coverage limitations.

The insured can pick 25 or 50 percent of the coverage through a second endorsement, Specified Additional Amount of Insurance for Coverage A— Dwelling (HO 04 20). A limit is set as an additional amount of insurance on the dwelling used to compensate for dwelling losses that exceed the declarations' limit.