Property Insurance FundamentalsQuestion 239 of 474
A policy with a $240,000 dwelling limit carries a 4% annual inflation guard. At the next renewal, twelve months later, that limit will be about:
a.$240,000
b.$259,200
c.$230,400
d.$249,600
Explanation
Inflation guard raises the amount of insurance automatically to track construction costs, so 4% of $240,000 adds $9,600 and the limit renews at $249,600. Leaving the limit at $240,000 describes a policy with no inflation guard at all. The $259,200 figure doubles the percentage to 8%, and $230,400 moves the limit in the wrong direction.
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