Inflation Protection is a feature commonly included in various insurance policies that provides an adjustment to the benefits offered, ensuring that the coverage keeps pace with the rising cost of living due to inflation. This protection is especially relevant in long-term insurance policies such as life insurance, long-term care insurance, and property insurance, where the value of the benefit can be eroded over time by inflation.
With Inflation Protection, the insurance company periodically increases the amount of coverage without requiring the policyholder to undergo additional medical examinations or reassessments of the insured property’s value. This adjustment is typically based on a fixed percentage or tied to an official measure of inflation such as the Consumer Price Index (CPI). The purpose of this feature is to help maintain the policy’s value, allowing the benefits to remain sufficient to cover the costs or expenses that the policy was originally intended to cover, despite the decrease in purchasing power caused by inflation over the years.