The limit of cover is typically the purchase price of the property or the estimated developed value of the site. Indemnity policies are not index linked. To increase the limit of cover, an ‘Escalator Clause’ can be added to certain policies. This clause automatically increases the limit of indemnity by a fixed percentage over a set number of years on a compound basis.
A typical example would be 5% per annum over a period of 5 years.
Alternatively the limit of indemnity can be increased at a later date to reflect an actual increase in the value of the property.