California Property & Casualty Broker-AgentProperty InsuranceMedium
A client owns a commercial building and is concerned about the impact of inflation on their property insurance limits. They want to ensure that their Coverage A (Building) limit automatically adjusts annually to reflect rising construction costs without requiring them to contact their agent every year. Which endorsement or provision would achieve this?
- APeak Season
- BReplacement Cost
- CAgreed Value
- DInflation Guard
Show answer & explanationAnswer & explanation
Correct answer: D. Inflation Guard
The Inflation Guard endorsement (or provision) automatically increases the amount of insurance on property by an agreed-upon percentage at regular intervals (e.g., quarterly or annually) to help offset the effects of inflation on building replacement costs.
Why the other options are wrong
- A. Peak Season increases limits for business personal property during specific periods of high inventory, not for the building due to inflation.
- B. Replacement Cost is a valuation method, not an automatic limit adjustment mechanism for inflation.
- C. Agreed Value waives coinsurance for a pre-agreed value, but doesn't automatically adjust for inflation.
Inflation Guard Endorsement
A Commercial Property endorsement that automatically increases the amount of insurance on covered property by an agreed-upon percentage at regular intervals (e.g., quarterly or annually) to help offset the effects of inflation on construction costs.
- Automatically adjusts coverage limits.
- Helps maintain adequate coverage in inflationary periods.
- Percentage increase is pre-determined.
Memory trick: Inflation Guard: Your policy 'Grows' with 'Rising Costs'.