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 automatically increases the death benefit — often annually, tied to a recognized inflation index such as the Consumer Price Index and subject to a stated cap — so that the coverage's purchasing power keeps pace with rising costs. The additional coverage generally requires no new evidence of insurability, though the premium for the increased amount rises accordingly.
Why the other options are wrong
- B) COLA raises the benefit amount; it does not reduce premiums as the insured ages.
- C) Premium waiver is the function of a waiver-of-premium rider, not a COLA rider.
- D) Term-to-permanent conversion is a conversion privilege and is unrelated to inflation protection.
Memory hook
COLA = coverage that grows with the cost of living. Inflation-proofing the death benefit, one index point at a time.