What is Inflation Guard?
Inflation guard is a valuable feature offered in certain types of insurance policies, particularly homeowners and property insurance. It automatically increases a policy’s coverage limits to keep up with inflation and the rising costs of goods, services, and property replacement. Without inflation protection, the value of an insurance policy might decrease over time, potentially leaving policyholders underinsured when they need to make a claim.
This feature is especially important for homeowners, as the costs of rebuilding a home, replacing personal belongings, or making repairs often rise with inflation. The policyholder’s coverage adjusts annually with inflation protection, typically based on a specified inflation index. This ensures that, over time, the policy maintains its ability to cover the actual cost of replacement or repair in the event of a loss.
In summary, inflation guard safeguards the actual value of an insurance policy, preventing a gap between the coverage amount and the actual cost of repairs or replacement due to rising prices over time.