From Fur Babies to Fire Hydrants: Your Home Insurance Premiums

When I got my kids a dog, I had no idea that it could affect my homeowners insurance. I happened to run into my insurance agent in the store when I was buying dog food and he asked me what kind of dog we had. When I told him, he said I should stop in the office the next day. I had no idea that things like this could affect premiums, so I started asking what else could do it as well. I created this site to help others understand some of the finer points of homeowners insurance and what they should think about to manage their rates.

What Is Inflation Guard With Homeowner's Insurance?

Insurance Blog

When you buy a house, you will have to buy a homeowner's insurance policy to protect it. Having a policy is not optional unless you pay cash for the home, which most people do not. The problem is that when you buy homeowner's insurance, the coverage is generally based on the amount you paid for the house. While this might be good right now, it might not be sufficient in the future, and this is what inflation guard is designed to protect you from.

What Is Inflation?

Most people know what inflation is, but in case you do not understand, it is basically the natural increase in the cost of things over time. Inflation can also be explained as the loss of value in the dollar over time. Inflation affects many parts of life, including the value of your house.

To understand this more, think about the price you paid for your house when you bought it years ago. Could you rebuild this same house for the price you paid? The answer is no. In today's money, it would probably cost significantly more to rebuild it, and this is why inflation guard is important to have.

How Does Inflation Guard Work with Homeowner's insurance?

When you choose a home insurance policy, you must include an amount that you are insuring your home for. If you do this and never change the amount, you would not have enough coverage on your home in just a few years. With inflation guard, your policy will automatically increase your coverage amount each year to keep up with inflation. The rate used will depend on the rate of inflation and on the method your insurance company uses to calculate this, but you should always have enough coverage on your home if you have this endorsement.

Do You Need It?

Having inflation guard is definitely not a necessity and it is not even a product available from all companies, but if you choose not to have it, you should choose to increase your structural coverage each year. You can decide how much to increase it by, but you should make sure that you increase it at least enough each year to keep up with inflation.

Some insurance companies offer inflation guard while others do not, but you can still protect your house either way by updating your coverage amounts each year. If you have questions about home insurance, talk to an agent.


20 January 2020