Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
The 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 C is correct
The COLA rider increases the policy's death benefit annually to help the coverage keep pace with inflation. Increases are typically tied to a cost index, such as the Consumer Price Index, and are often subject to a stated maximum, with premiums adjusted for the added coverage. The rider preserves the real purchasing power of the death benefit over time, which is especially important for younger insureds who may hold the policy for many decades.
Why the other options are wrong
- A) The COLA rider does not reduce premiums; premium adjustments track the increased death benefit as it rises.
- B) Converting the policy to term is the function of a conversion privilege, not of the COLA rider.
- D) The COLA rider adjusts the benefit for inflation; it does not design the cash value to exceed the face amount.
Memory hook
COLA rider: the death benefit grows with the price of everything else.