When considering raising insurance limits, the increasing value of your assets will likely play a major role. But one factor you may not be considering is the role inflation takes in diminishing the value of your insurance benefits.
Life Insurance and Inflation
Your death benefit is a fixed amount that you have determined will pay certain expenses after you pass away. But as inflation decreases the power of a dollar by raising the cost of just about everything, your life insurance death benefit has less and less power for your heirs.
As you watch inflation take its toll on the price of groceries, gas and other items, consider raising your death benefit in order to help it keep pace with the needs of your family.
Home Insurance and Inflation
Your home insurance policy (and flood insurance or renter’s insurance) is affected by inflation in two ways. First, as inflation raises prices, it can affect the contents limit of your policy adversely especially if your insurer reimburses your replacement value, because the cost to replace your items is increasing.
The second aspect of home insurance affected by inflation is the limit to rebuild the structure after an insurable incident. Because inflation increases the cost of building supplies either through the supplies themselves or through the price of oil and gas going up, your limits could soon be too low to have your home completely rebuilt.
Long-Term Care
Nursing homes and in-home care expenses do not stay stagnant as inflation increases the cost of living in your area. But unless you’re careful, your long-term care insurance policy may not properly adjust in consideration of inflation.
Many long-term care policies have a cost of living adjustment (COLA) rider that you can add which allows your benefit to increase to combat inflation.
Inflation isn’t just something that working people have to deal with, and it isn’t something that plays no role in your various insurance policies. In fact, your insurance benefits are directly impacted by inflation and insurance has no way of making you whole again after an insurable incident if you don’t make the effort to keep your benefits reasonable in the face of increasing prices around you.
To find out how you can increase your Denver home insurance coverages in order to deal with inflation, give us a call at Insurance Advisors.