Question 26

Cost of living rider allows the policyowner to increase the face amount to adjust for inflation.

The cost of living rider permits the policyowner to increase the face amount of a life insurance policy to keep pace with inflation, ensuring that the death benefit remains adequate over time.

A) Return of premium

The return of premium rider provides a refund of premiums paid if the insured survives the policy term, but it does not allow for an increase in the face amount to adjust for inflation. This option focuses on premium reimbursement rather than face amount adjustment.

B) Cost of living

The cost of living rider specifically addresses the need to adjust the face amount for inflation, making it the correct choice. This rider allows for periodic increases to ensure that the policy benefits are not eroded by inflation over time.

C) Payor benefit

The payor benefit rider is designed to waive premium payments if the policyowner passes away or becomes disabled, but it does not provide an option to increase the face amount for inflation. This rider addresses premium payment obligations rather than face amount adjustments.

D) Guaranteed insurability

The guaranteed insurability rider allows the policyowner to purchase additional coverage at specified times without proving insurability. However, it does not specifically relate to adjusting the existing face amount for inflation, making it less relevant to the question.

Conclusion

The cost of living rider is the only option that directly enables the policyowner to increase the face amount to counteract inflation, ensuring that the policy's value remains relevant over time. All other options focus on different benefits or conditions that do not include adjustments for inflation.