Which statement about inflation guard endorsements is true?

Which statement about inflation guard endorsements is true?

• A. It adjusts the deductible in line with inflation.
• B. It applies only to the contents of the building, not the building itself.
• C. It automatically increases the limit of insurance by the percentage shown in the declarations.
• D. It requires the insured to annually request a limit adjustment.

Answer: (C)

Inflation guard endorsements are designed to keep replacement costs coverage aligned with inflation. The core idea is that the endorsement uses a stated percentage in the declarations to automatically increase the limit of insurance over time, so coverage keeps pace with rising rebuilding costs without the insured having to do anything. That automatic adjustment is why this statement is true: the limit increases by the percentage shown, as declared. This doesn’t involve changing the deductible, which is a separate aspect of the policy; inflation guard focuses on the limits, not the deductible. It also isn’t limited to contents only — inflation guard typically applies to the dwelling and other covered structures as well as contents, depending on the policy form. And there’s no requirement to annually request an adjustment—the increases occur automatically according to the declarations. For example, a dwelling limit of 200,000 with a 5% inflation guard would adjust toward 210,000 over time automatically.

Inflation guard endorsements are designed to keep replacement costs coverage aligned with inflation. The core idea is that the endorsement uses a stated percentage in the declarations to automatically increase the limit of insurance over time, so coverage keeps pace with rising rebuilding costs without the insured having to do anything. That automatic adjustment is why this statement is true: the limit increases by the percentage shown, as declared.

This doesn’t involve changing the deductible, which is a separate aspect of the policy; inflation guard focuses on the limits, not the deductible. It also isn’t limited to contents only — inflation guard typically applies to the dwelling and other covered structures as well as contents, depending on the policy form. And there’s no requirement to annually request an adjustment—the increases occur automatically according to the declarations. For example, a dwelling limit of 200,000 with a 5% inflation guard would adjust toward 210,000 over time automatically.