Question

Paul lives in an area where property values are appreciating rapidly. He would like his homeowner's policy to reflect the increase in the value of his home. Which endorsement might Paul purchase to accomplish this?

A. Inflation Guard
B. Increased Limits on Personal Property
C. Additional Structures
D. Valuation Endorsement

Answer 1

Paul should purchase the Inflation Guard endorsement to reflect the increase in the value of his home.

Step-by-step explanation:

The endorsement that Paul might purchase to reflect the increase in the value of his home is the Inflation Guard endorsement. This endorsement automatically adjusts the coverage limit of Paul's homeowner's policy to keep up with the increasing property values. It ensures that Paul's coverage limit is sufficient to rebuild or repair his home in the event of a loss, considering inflation and rising costs of construction materials and labor.

For example, if Paul's home is currently insured for $200,000 and he purchases the Inflation Guard endorsement with a 5% inflation factor, his coverage limit will increase to $210,000 after one year (200,000 + 5% = 210,000). This way, Paul's coverage keeps pace with the appreciation of his home's value.

The Inflation Guard endorsement is an important consideration for homeowners in rapidly appreciating areas to ensure they have adequate coverage that reflects the current value of their property.