Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A cost-of-living (COLA) rider on a life insurance policy:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A COLA rider adjusts the death benefit upward periodically, usually tied to an inflation index and subject to a cap, so that the coverage retains its purchasing power over time. The additional coverage is generally added without requiring evidence of insurability, and the rider premium reflects the added protection. COLA riders are common on policies where the long-term value of coverage must keep pace with rising costs, such as coverage intended to fund final expenses many years in the future. This helps prevent inflation from eroding the real value of the death benefit.
Why the other options are wrong
- B) COLA affects the benefit, not the premium; premiums do not automatically decrease as the insured ages. Age-based premium reductions are not part of a COLA rider. The premium is set independently of the rider's increases.
- C) The rider does not convert the policy into an annuity at any age. Conversion to an annuity is a separate feature of some contracts, not a function of the COLA rider.
- D) An accidental death benefit pays extra for accidental death; COLA addresses inflation rather than cause of death. The COLA rider is keyed to price changes, not to how death occurs.
Memory hook
COLA rider = inflation's eraser, boosting your benefit without a new health exam.