Hawaii Insurance Adjuster License Practice Exam

What option may be included to ensure that a dwelling policy remains aligned with market fluctuations?

1. Market Value Endorsement

2. Inflation Protection Endorsement

3. Automatic Increase Endorsement

4. Underinsurance Guard Endorsement

The correct answer is: Automatic Increase Endorsement

The option that ensures a dwelling policy remains aligned with market fluctuations is the Automatic Increase Endorsement. This endorsement serves to automatically adjust the coverage amount of the dwelling to account for increases in value over time, typically due to inflation or rising construction costs. As the market value of homes increases, this endorsement allows the policyholder to maintain adequate coverage without having to reassess or manually update the policy limits regularly. The adjustments help protect the insured property against the risk of underinsurance in the event of a loss, ensuring that the coverage remains relevant and sufficient according to current market conditions. The other options, while they may offer additional protections, do not specifically address automatic adjustments in response to market conditions in the same manner. For example, inflation protection generally aims to safeguard against loss of purchasing power rather than adjusting the dwelling's insured value automatically. The market value endorsement and underinsurance guard endorsement refer to different concepts in property valuation and coverage, focusing on aspects not directly linked to automatic updates of the policy limits based on market fluctuations.