How does the Cost of Living Rider adjust the policy?

The Cost of Living Rider is designed to adjust the life insurance policy's face amount in relation to inflation, ensuring that the coverage provided remains adequate over time. This is important because inflation can erode the purchasing power of money, meaning that a fixed death benefit amount may not have the same value in the future as it does at the time the policy is issued.

When the Cost of Living Rider is included in a policy, it typically ties the increases in the face amount to a specific inflation index, such as the Consumer Price Index (CPI). As inflation rises, so does the death benefit, providing the insured and their beneficiaries with increased financial protection. This rider thus helps policyholders maintain sufficient coverage without needing to purchase additional policies or undergo further underwriting as their needs change due to inflation.