What type of policy endorsement is used to increase coverage automatically?

The correct answer is the automatic inflation endorsement. This type of endorsement is designed to adjust the coverage limits automatically over time, typically in accordance with inflation rates or adjustments in the market value of the insured property. This ensures that the policyholder's coverage adequately reflects current replacement costs or values without requiring them to manually increase their limits or purchase additional coverage.

This feature is especially important in managing risks associated with rising costs, as it helps maintain the effectiveness of the insurance policy over time. Without this endorsement, a policy might not provide sufficient coverage in the event of a claim, leading to potential financial losses for the insured if they are underinsured.

The other options do not specifically denote a mechanism for automatic coverage increases. An increase in coverage endorsement typically would have to be activated manually and might not account for inflation automatically. The agreed value endorsement is primarily used to establish a predetermined value that the insurance company agrees to pay in the event of a total loss, ensuring that there is no dispute over value but not designed for automatic adjustments. The subject to limits endorsement pertains to limitations on coverage and does not address automatic increases in coverage.