Inflation is a fall in the market value or purchasing power of a money (a general and progressive increase in prices).

This is especially important with a homeowners policy. It may have cost you $100,000 to build your home 10 years ago, but it might cost $120,000 to replace it today. As inflation increases the cost of living rises. Suppose the present rate of inflation is 3%. What that means is that the goods you could buy last year for $100 this year will cost you $103, next year $106, and in ten years time $134.

# Inflation Calculator # uses the average Consumer Price Index for a given calendar year and for the current year it's used the latest monthly index value.

Caused especially by :
- demand is growing faster than supply and prices rise
- when a company’s costs go up it needs to increase prices to maintain its profit margins

Unanticipated inflation means problems. Creditors (lender) lose cash and debtors (borrower) gain money if the lender does not anticipate inflation correctly.