The State of Colorado has always been an attractive destination for people who enjoy the outdoors. Now more than ever, it seems people are choosing Colorado not just for a winter getaway, but as a place to call home. As a result of the market pressure that the ever-increasing population has caused, property values have skyrocketed in the Rockies. For homeowners that means two things: 1) your home is likely worth a lot more than when you purchased it; and 2) you could be woefully underinsured.

So, how do you make sure any increase in your home value remains a gift and not a curse? Two words: inflation protection. Does your current homeowners’ policy provide inflation protection? How do you find out? First, get a copy of your policy from your insurance carrier if you do not already have one, and review it to see if it includes an “inflation guard” endorsement. An inflation guard endorsement provides an enhancement to your insurance coverage over and above the written policy limit to cover increase in the cost of repair or replacement.

Okay, you have an inflation guard endorsement in your policy. Great! But, has the protection provided under the policy kept up with the inflation in your town? Inflation guard endorsements are typically written to account for an average expected inflationary rate of property values and will provide for annual incremental increases in insurance coverage. Unfortunately, for those attractive markets like Denver, your inflation guard coverage may not keep up with the actual inflation. So now what? Do your research and find out the current value of your property. There are many online tools to check the value of your property or you can engage a professional property appraiser to provide you a current appraisal, which is likely the most accurate option.

Your next step is to call your insurance company, agent, or broker to validate that your insurance guard coverage provides sufficient insurance to match the current value of your property, and if not, increase your coverage to a sufficient amount.

Under many insurance policies, your insurance company may not have a duty to tell you that you are underinsured. For that reason, and many others, you have to be diligent in protecting your home or a total loss of your property could also mean a devastating financial burden.

  • It seems to me this would best apply in the event of a total loss in a state with a valued policy law. Otherwise, repair/restoration costs may not correspond with “hotspot” home values, and you could be paying more premium than you would ever use coverage for. Like just about everything else with insurance, you have to weigh the risks, calculate the odds, and roll the dice.

  • Dawn Hansen

    Wouldn’t you want to be insured for the cost to rebuild rather than the value of the property?

  • shirley heflin

    Dear Mr. Burchard:

    I’ve never heard of an “Inflation Guard Endorsement” before, however, billboards should be placed along interstates advising Insureds of said coverage! It sounds like brilliant coverage and something too good for Insureds to pass up!

    Like the last paragraph says:

    “…your insurance company may not have a duty to tell you that

    you are underinsured. For that reason…you have to be diligent
    in protecting your home or a total loss of your property could
    also mean a devastating financial burden…”

    In other words, Insureds cannot count on their Insurer to call and/or write them saying “Did you know that there’s an Inflation Guard endorsement available to you under your existing policy? This endorsement pays in excess of your existing policy limit and will cover the increase of repair or replacement.”

    What that says to me is that a carrier will issue a policy, take the premiums and worry about a submitted claim when a loss occurs. They’re not going out of their way to offer coverage that will make them liable for additional coverage.

    Many people don’t use Insurance Agents so they may be unaware of this coverage. Many people buy their insurance coverage on the internet. My point is that most people would want this “Inflation Guard” Endorsement if they are aware of same.

    Finally, you mention that this coverage is applicable in the State of Colorado. It would be nice if the Merlin Law Group would advise its readers the names of all States that offer the Inflation Guard endorsement.

    Tampa, FL