Once you purchase a home, an essential next step you must take is purchasing homeowners insurance so that your new asset is covered should something detrimental happen. Homeowners insurance coverage protects you from having to pay out of pocket if your home is damaged due to events such as extreme weather, vandalism, and fire. If you have purchased a home insurance policy, then your home and personal property will be repaired or replaced if any of these events should occur.
But did you know that sometimes, homeowners find out too late that their insurance policy does not cover the total amount of what is lost? When this happens, homeowners have to dig into their own pockets to help cover replacement costs because their policy is outdated or insufficient. Don’t let yourself fall into this category. You need inflation protection.
What is Inflation Guard on Homeowners Insurance?
In order to make sure that your homeowner’s insurance policy stays up to date. Your policy should include an inflation guard endorsement. This endorsement automatically ensures that your policy stays current with the rising costs of material and labor due to inflation.
When you select this endorsement, your coverage limits will rise according to the rate of inflation every time your policy renews. Typical inflation increases are between 4-8%. Your insurance costs will also rise, but the percentage is minuscule, typically between 2-4%.
With Inflation Guard, the total cost to repair or rebuild your home should be covered by your insurance company if you need to file a claim, even if the costs of wood, other materials, and labor have increased throughout the year.
Who Needs Inflation Guard Coverage?
In short, every homeowner needs an Inflation Guard Coverage endorsement on their homeowner’s insurance policy. Homeowners who choose not to carry this coverage may have to shoulder some of the cost to rebuild if their home is deemed to be a total loss in a calamity.
Sometimes, homeowners who do not plan to live in a home for an extended period choose to chance it and will not select Inflation Guard Coverage, but that is a risky move considering inflation changes from year to year, and a sudden increase can occur at any time. If you want to ensure that your coverage increases along with inflation increases, then Inflation Guard coverage is imperative.
Some homeowners insurance policies offer total replacement cost options, which should cover the cost of inflation increases, but it is always wise to check with your carrier to ensure that you carry this type of coverage if you choose not to carry Inflation Guard.
Inflation Guard Coverage Example
To help you understand Inflation Guard Coverage, check out the example below.
Say you carry one million dollars in dwelling coverage and inflation guard coverage at the high end of 8%. Six months into the year, your home is damaged, and you suffer a total loss. Without Inflation Guard, your insurance policy will cover one million dollars in damage, but with Inflation Guard, you will now receive an additional $40,000 in coverage to keep up with the costs of inflation during the year. Therefore, you will now have $1,040,000 to rebuild your home and replace the contents that were lost.
Need Help Finding Inflation Guard Coverage?
At Gebhardt Insurance Group, our mission is to help you ensure that your belongings are adequately insured. Our team is available to help you review your current policies, look for new policies, and compare available policies from different carriers to make sure your policies are up to date with your coverage needs.
We shop your local and national carriers to help you find the right fit and can help walk you through the process of selecting the proper coverage. Do you have more questions about Inflation Guard overage? Do you need to review and update your current policies? Are you ready to purchase new coverage? If so, we are available to answer your questions, so give us a call today.