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 changes in the Consumer Price Index, so that the protection keeps pace with inflation. The additional coverage is purchased at an additional premium based on the insured's current attained age. This rider is popular because it protects the purchasing power of the death benefit over a long policy period without requiring the owner to apply for new coverage.
Why the other options are wrong
- B) The rider does not reduce premiums; the added coverage carries its own additional premium.
- C) The rider adds coverage; it does not convert the policy's type.
- D) Dividends depend on participating policy experience and are unrelated to a COLA rider.
Memory hook
COLA rides the CPI upward so today's coverage is still worth something in thirty years. Inflation-proof the benefit.