Question 8

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

The cost of living rider enables 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) Waiver of premium

The waiver of premium rider allows the policyowner to skip premium payments if they become disabled, but it does not provide any adjustments to the face amount or address inflation. Thus, this option is incorrect in the context of adjusting the policy's value over time.

B) Cost of living

This is the correct option as the cost of living rider specifically allows for adjustments to the face amount of the policy to account for inflation, thereby maintaining the purchasing power of the death benefit over the years.

C) Guaranteed insurability

The guaranteed insurability rider permits the policyowner to purchase additional coverage at specified times without proving insurability, but it does not automatically increase the face amount for inflation. Therefore, this option does not serve the purpose of inflation adjustments.

D) Accidental death

The accidental death rider provides an additional benefit if the insured dies due to an accident. However, it does not adjust the face amount for inflation. This option is unrelated to the concept of maintaining the value of the policy over time due to inflation.

Conclusion

The cost of living rider is the only option that directly addresses the need to increase the face amount of a life insurance policy in response to inflation, ensuring that the policy remains relevant and adequate for future needs. All other options either serve different functions or do not pertain to inflation adjustments, confirming that B is the definitive correct choice.