What Does Inflation Factor Mean?
The inflation factor is the portion of the premium that accounts for the inflation that might affect the price of the products and services that are part of the coverage. The insured may also ask for separate inflation protection as a feature of their insurance.
Insuranceopedia Explains Inflation Factor
Prices tend to go up over the years, including for items that people usually insure, such as medical coverage and property coverage. The price of medicines and building materials may get more expensive than they were when the insurance was first purchased. Insurers have factored this inflation into their premium pricing.
The wary person who still fears they are underinsured because of inflation may also ask for additional coverage by buying the inflation protection feature. This feature adds a percentage over the years to the insurance limit.