What Is Inflation Guard For Homeowner's Insurance?

Even if you don't make any improvements or changes, your homeowner's insurance policy must adapt to the times.

Your homeowner's insurance policy needs to keep pace with rising prices. If it does not, you will be underinsured, which can be very expensive. In order to account for this, homeowners insurance providers frequently offer "inflation guard."

Explanation of Homeowners' Insurance Inflation Guard

Your homeowner's insurance provider will likely automatically change your coverage amount at each renewal to account for inflation. They can estimate how much your coverage must increase each year to keep up with escalating costs, such as development. (Providers such as CoreLogic offer these forecasts.) Typical annual inflation adjustments range between 2 and 4 percent.

Multiple coverage types in a conventional homes insurance policy may need to keep pace with inflation:

• Coverage for your home's construction
• Coverage for your personal possessions
• Coverage for other structures, such as sheds and fences.
• Extra living expenses coverage if you are unable to dwell in your house due to damage.

What coverage does inflation protection apply to? In our review of firm filings with state insurance departments, we discovered that some insurers exclusively apply it to home insurance. Others use it for homes, their contents, and other constructions. And still, others apply it to each of the preceding four coverage categories.

As inflation adjustments are implemented, your homeowner's insurance premium will increase, but not by the same amount. For instance, according to a state insurance filing by The Hartford, coverage can grow by 4%, 6%, or 8%, while premiums increase by 2%, 3%, and 4%, respectively.

Do not think that your company's inflation guard will be sufficient to increase your coverage limits if you make renovations or other upgrades to your home. You should nevertheless confirm that the policy's specified coverage limitations meet the full cost of replacing your home and goods. Notify your insurer if house improvements necessitate an increase in insurance coverage.