Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
The purpose of a cost-of-living adjustment (COLA) rider on a life insurance policy is to:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A cost-of-living adjustment (COLA) rider automatically increases the policy's death benefit, and sometimes the cash value, on a regular schedule, typically tied to a cost-of-living index, to help the coverage keep pace with inflation. Without it, inflation erodes the real purchasing power of a fixed death benefit over a long period. The rider is designed to preserve the future value of the protection the policyowner originally purchased.
Why the other options are wrong
- B) COLA affects coverage amounts; it does not decrease the premium as the insured ages.
- C) Conversion to an annuity is a separate policy feature or election, not a COLA function.
- D) Cash value guarantees come from the policy design, not from a COLA rider.
Memory hook
COLA rider = an inflation escalator for your death benefit.