Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceEasy
A client is concerned about inflation eroding the purchasing power of their life insurance policy's death benefit over time. Which rider would directly address this concern by automatically increasing the death benefit without requiring proof of insurability?
- AGuaranteed Insurability Rider
- BWaiver of Premium Rider
- CCost of Living Rider
- DAccidental Death Benefit Rider
Show answer & explanationAnswer & explanation
Correct answer: C. Cost of Living Rider
The Cost of Living Rider (COLR) is specifically designed to protect the purchasing power of the death benefit by increasing it periodically, typically tied to an inflation index, without requiring the insured to prove insurability.
Why the other options are wrong
- A. Guaranteed Insurability allows purchasing additional coverage at future dates, not an automatic inflation adjustment.
- B. Waiver of Premium waives premiums if the insured becomes disabled, not addressing inflation.
- D. Accidental Death Benefit pays an extra amount if death is due to an accident, unrelated to inflation.
Cost of Living Rider (COLR)
A rider that increases the death benefit of a life insurance policy periodically to counteract the effects of inflation, usually tied to a consumer price index.
- Increases death benefit automatically.
- Does not require proof of insurability.
- Typically tied to an inflation index (e.g., CPI).
- May have a maximum increase limit.
Memory trick: Riders add special gear to your policy's protective shield.