What is the benefit of a cost of living adjustment rider?

What is the benefit of a cost of living adjustment rider?

• A. It decreases premiums over time
• B. It increases coverage limits periodically
• C. It provides a cash payout on maturity
• D. It increases disability benefits annually

Answer: (D)

The benefit of a cost of living adjustment (COLA) rider is that it increases disability benefits annually. This rider is particularly important for individuals who rely on disability insurance for their primary source of income. Over time, inflation can erode the purchasing power of fixed benefits. By incorporating a COLA rider, the benefits are adjusted periodically to keep up with inflation, ensuring that the insured party maintains a similar standard of living despite rising costs. This feature provides financial protection against inflation, making it a valuable addition to disability insurance policies as it helps in sustaining the beneficiary's purchasing power over the long term.

The benefit of a cost of living adjustment (COLA) rider is that it increases disability benefits annually. This rider is particularly important for individuals who rely on disability insurance for their primary source of income. Over time, inflation can erode the purchasing power of fixed benefits. By incorporating a COLA rider, the benefits are adjusted periodically to keep up with inflation, ensuring that the insured party maintains a similar standard of living despite rising costs. This feature provides financial protection against inflation, making it a valuable addition to disability insurance policies as it helps in sustaining the beneficiary's purchasing power over the long term.