Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
A cost-of-living adjustment (COLA) rider on a life insurance policy is designed to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A COLA rider increases the policy's death benefit over time, typically in line with a cost-of-living index such as the CPI, so the coverage keeps pace with inflation. The additional coverage usually requires additional premium, which may increase with the benefit. The rider is valuable when the insured's family would otherwise see the real value of the coverage erode over a long policy period.
Why the other options are wrong
- B) Premiums generally rise with the rider's benefit increases; they do not decrease with age.
- C) The rider does not convert the policy to term; the base policy remains permanent or term as issued.
- D) The death benefit is increased, not reduced, and cash-value growth is not tied to reducing the benefit.
Memory hook
COLA rider = coverage that inflates with the cost of living. Today's dollar buys tomorrow's benefit.