Inflation Guard

Imagine needing to rebuild your home but discovering your insurance coverage doesn’t match today’s construction costs. That’s where inflation guard comes in. It’s a feature in some homeowners insurance policies that automatically increases your dwelling coverage each year to keep pace with rising labor and material costs.

Without it, your coverage amount could stay locked at the home’s original value, leaving you underinsured if prices rise. Some insurance companies include inflation guard in your base policy, while others offer it as an optional endorsement you can add for more protection.

Why inflation guard matters 

Construction costs don’t stay still; they often rise year after year. Inflation guard helps your insurance keep up. Without this feature, your policy limit may not reflect the true cost of rebuilding after a total loss, especially if you’ve held your policy for many years.

If your coverage doesn’t adjust, you could be left paying thousands out of pocket. Inflation guard helps prevent that gap by keeping your dwelling coverage, also known as Coverage A, aligned with today’s real-world rebuild costs.

How does inflation guard work? 

Inflation guard adjusts your policy’s dwelling limit annually by a fixed percentage or based on a cost index. These increases usually happen at your policy renewal and commonly range from 2% to 6%, depending on your insurance company and local trends.

Here’s what inflation guard typically affects:

• Dwelling coverage (Coverage A) – Your main coverage limit increases over time.
• Other structures/personal property – This may also increase if linked to dwelling coverage.
• Premium – Your rate may go up slightly as your coverage increases.

That yearly adjustment helps your policy grow alongside inflation, rather than fall behind it.

How inflation guard affects your dwelling coverage 

Inflation decreases purchasing power, which means rebuilding your home gets more expensive over time. Inflation guard makes sure your insurance keeps up. For example, if your dwelling coverage is $300,000 and your inflation guard increases it by 4%, you’ll have $312,000 in coverage at your next renewal.

That automatic increase can make a big difference if you ever need to file a major claim.

What is replacement cost, and how does inflation guard help? 

Replacement cost is what it would take to rebuild your home with similar materials at today’s prices. It’s not the same as market value. Inflation guard helps your policy reflect this true rebuilding cost, so you’re not caught off guard if prices jump.

By keeping your coverage in sync with rising construction costs, inflation guard reduces your risk of being underinsured and having to pay out of pocket after a major loss.

Common inflation guard percentages and how they’re applied 

Most insurance companies apply inflation guard increases of 2% to 6% annually. Some use indexes like the Consumer Price Index (CPI) or regional building cost data. Others apply a flat rate each year.

• Automatic rate – This is often set by your insurer and applied at renewal.
• Varies by region – Local construction trends may influence your adjustment.
• Policy details – The percentage should be listed on your declarations page.

Not sure how yours works? A VIU by HUB Advisor can help explain how your inflation guard is calculated.

What is an inflation guard coverage endorsement? 

If your policy doesn’t include inflation guard by default, you may be able to add it as an endorsement. This optional feature adjusts your coverage automatically each year, with no need to request changes manually.

A VIU by HUB Advisor can help you add this endorsement and makes sure your coverage reflects today’s costs.

Is inflation guard included or optional? 

Inflation guard isn’t always included automatically in a homeowners policy. Some insurance companies build it into standard coverage, while others offer it only as an optional endorsement. A standard policy might adjust your coverage annually or reflect a general inflation trend, but not always. An inflation guard endorsement is more targeted. It uses a cost index to regularly adjust your coverage and offers more consistent protection.

If you’re not sure what your policy includes, a VIU by HUB Advisor can walk you through it and help make sure you’re not falling behind on coverage.

Who benefits most from inflation guard? 

Inflation guard can be a smart choice for many homeowners. It helps your coverage stay aligned with rising construction and replacement costs over time. This feature is especially useful for homeowners who:

• People living in high-cost or high-inflation areas
• Homeowners planning to stay long-term
• Anyone who wants set-it-and-forget-it protection
• Policyholders looking to avoid coinsurance penalties

If your goal is to avoid surprises after a claim, inflation guard can help.

Does inflation guard increase your insurance cost? 

Yes, but just a little. Because it increases your coverage, it can cause your premium to go up slightly each year. That said, the small increase is often well worth it compared to the cost of being underinsured after a loss.

What other policy options can boost your protection? 

Inflation guard is one way to protect your home’s value, but it’s not the only one. Other policy options can offer stronger protection if rebuilding costs rise faster than expected. You can also consider:

• Extended replacement cost – This pays above your dwelling limit if rebuilding costs more than expected.
• Guaranteed replacement cost – This covers full rebuild costs, no matter how high they climb.

How to check if your policy includes inflation guard 

Not sure if inflation guard is part of your policy? It’s an important feature that helps your coverage keep up with rising costs. Here’s how to find out:

• Check your declarations page – Look for "inflation guard" or "inflation protection."
• Compare past renewals – Has your dwelling coverage increased over time?
• Ask a VIU by HUB Advisor – They can confirm your coverage and help you make updates.

It’s smart to review your policy each year, especially after major home updates, to be sure your coverage still fits.

When to manually adjust your coverage 

You may still need to adjust your policy after major changes, even if inflation guard is in place. It's a good idea to conduct a manual review in those cases. Consider doing so if you:

• Renovate or add square footage
• Upgrade finishes like kitchens or bathrooms
• Add new structures, like a garage, shed or deck

Inflation guard doesn’t account for these types of changes, so regular reviews help you stay fully protected.

How do you know if your inflation guard is working? 

Want to make sure you’re getting the full benefit? Compare your coverage limit to local rebuild costs. If it seems out of date, you may need to adjust it, even if inflation guard is in place.

FAQs

Is inflation guard required? 

No, but many lenders and insurance carriers include it to help prevent underinsurance. Without it, your coverage could fall behind real-world costs, which may result in a reduced payout.

Is automatic increase the same as inflation guard? 

Not quite. Automatic increases might be a fixed rate your insurance company applies, while inflation guard is typically tied to inflation rates or cost indexes. It’s a more precise way to keep your coverage in step with the market.

Can inflation guard protect me from being underinsured after a renovation? 

Not entirely. Inflation guard adjusts your coverage for general inflation, but it doesn’t automatically account for major home upgrades or additions. If you’ve renovated, added square footage, or made big changes to your home, you’ll still need to manually update your policy to reflect the increased rebuild cost.