3.13.7 Cost of Living Adjustment Rider
The cost of living adjustment (COLA) or cost of living (COL) rider is based on the Consumer Price Index (CPI). As inflation increases, so does the value of the policy, with restrictions. Typically, the percentage increase is limited to a maximum of 5% per year. If the CPI rises, the policyowner must pay for the additional coverage. However if the CPI drops, coverage does not decrease.
(When used in a disability income policy, this rider kicks in if the insured actually has a disability insurance claim and then only if the disability lasts for more than a year.)
