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 (COLA) rider allows an insured to increase their monthly benefits in alignment with inflation or a specified percentage, ensuring that the purchasing power of the benefits is maintained over time.

A) cost of living adjustment

This option is correct because the cost of living adjustment rider specifically addresses the need to increase monthly benefits in accordance with inflation or a predetermined percentage, thus providing financial protection against the rising cost of living during a disability.

B) future income option

The future income option is designed to allow insured individuals to purchase additional coverage in the future without undergoing medical underwriting. However, it does not pertain to increasing existing monthly benefits based on a percentage or economic index.

C) return of premium

The return of premium rider provides a refund of the premiums paid if the insured does not make a claim during the policy term. This rider does not facilitate an increase in monthly benefits, making it irrelevant to the question.

D) income replacement

Income replacement refers to the provision of benefits to replace lost income due to disability, but it does not involve an adjustment mechanism for increasing benefits over time based on a specific percentage or economic index.

Conclusion

The cost of living adjustment rider is the only option that directly enables an insured to increase monthly benefits in relation to inflation or a specified percentage. All other options either serve different purposes or do not provide a mechanism for increasing benefit amounts, making them unsuitable choices in this context.