A cost-of-living rider on a life policy affects the policy by doing what when the CPI changes?

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Study for the Louisiana Series 103 – Life, Health, and Accident or Sickness Insurance Exam. Familiarize yourself with key concepts through engaging questions and explanations. Prepare effectively for your exam!

Multiple Choice

A cost-of-living rider on a life policy affects the policy by doing what when the CPI changes?

Explanation:
A cost-of-living rider is meant to keep the death benefit in line with inflation. It ties increases to changes in the CPI, so when CPI rises, the rider automatically increases the policy’s face value. This helps maintain the benefit’s purchasing power over time. It doesn’t reduce the face amount or leave it unchanged, and while the higher death benefit may lead to higher premiums, the core effect tied to CPI changes is the increase in the face value.

A cost-of-living rider is meant to keep the death benefit in line with inflation. It ties increases to changes in the CPI, so when CPI rises, the rider automatically increases the policy’s face value. This helps maintain the benefit’s purchasing power over time. It doesn’t reduce the face amount or leave it unchanged, and while the higher death benefit may lead to higher premiums, the core effect tied to CPI changes is the increase in the face value.

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