Question 78

An insured can increase the monthly benefits paid under a disability income policy by a specified percentage or in relation to an economic index with the cost of living adjustment rider.

The cost of living adjustment rider allows an insured to increase their monthly benefits in alignment with inflation or a specified economic index, ensuring that the benefits maintain their purchasing power over time.

A) cost of living adjustment

This option is correct because the cost of living adjustment (COLA) rider specifically provides for increases in monthly benefits based on inflation or a predetermined percentage. This feature is crucial for maintaining the value of benefits in the face of rising living costs.

B) future income option

The future income option allows insured individuals to increase their coverage in the future without additional medical underwriting, but it does not provide for automatic increases in benefits based on economic indicators. Therefore, it does not meet the criteria of increasing benefits by a specified percentage or index.

C) return of premium

The return of premium rider is designed to refund premiums paid if the insured does not claim benefits during the policy term. While it adds value to the policy, it does not facilitate increases in monthly benefits based on inflation or a specified economic index.

D) income replacement

Income replacement refers to the primary function of disability income policies, which is to replace lost income due to disability. However, it does not specifically address the mechanism for increasing benefits by a percentage or economic index, making it an incorrect choice in this context.

Conclusion

The cost of living adjustment rider is the only option that directly addresses the need for increasing monthly benefits in line with inflation or a specified percentage. All other options either serve different purposes or do not facilitate the specified increases, thus confirming that A is the definitive correct answer.