Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
A cost-of-living adjustment (COLA) rider on a life insurance policy typically:
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The COLA rider increases the policy's death benefit over time — commonly tied to the Consumer Price Index or a fixed percentage — so the protection keeps pace with inflation. The additional coverage requires an additional premium, which rises with the benefit increases. It does not lower premiums, does not pay cash dividends, and does not convert the policy type; it simply grows the amount of coverage in force. COLA protection matters most for long-term policies where inflation can quietly erode the real value of the death benefit.
Why the other options are wrong
- B) COLA riders adjust the benefit amount upward over time. They do not decrease the premium as the insured ages.
- C) Dividends are paid by participating policies out of surplus. The COLA rider grows the death benefit rather than paying cash to the insured.
- D) The rider does not change the policy form. It simply increases the death benefit on the existing policy to offset inflation.
Memory hook
COLA = the policy's growth spurt so inflation never shrinks the check.