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 policy's death benefit over time, usually annually based on a measure of inflation such as the CPI, so the coverage keeps pace with rising costs. The additional coverage may be priced into the rider, and the premium may increase as the benefit grows. The rider is about protecting the benefit's purchasing power, not about lowering premiums, guaranteeing cash value, or reducing coverage with age.
Why the other options are wrong
- B) COLA riders adjust benefits for inflation; they do not reduce premiums when interest rates fall.
- C) Cash value guarantees against market losses describe fixed policies or index floors, not a COLA rider.
- D) The rider increases coverage, not decreases it, to maintain purchasing power over time.
Memory hook
COLA = the death benefit that inflates with the cost of living, keeping its buying power.