South Carolina Life Insurance Practice Exam

Which rider allows for the increase of death benefit without additional premiums?

1. Accidental death rider

2. Waiver of premium rider

3. Guaranteed insurability rider

4. Cost of living rider

The correct answer is: Cost of living rider

The cost of living rider is designed to help ensure that the death benefit of a life insurance policy keeps pace with inflation. When this rider is included in a policy, it automatically increases the death benefit at specified intervals without the need for additional premiums. This increment helps to maintain the purchasing power of the benefits that will be paid out to beneficiaries in the future, countering the effects of inflation over time. This rider is particularly useful in long-term policies since it allows the insured to adapt to changing economic conditions without financial strain. As the cost of living rises, the guaranteed increases in the death benefit help ensure that the financial protection afforded to beneficiaries remains adequate and relevant. Other options like the accidental death rider provide additional benefits in the event of death due to an accident, but they do not adjust the base death benefit or require additional payments for those increases. The waiver of premium rider pauses premium payments in the event of disability, while the guaranteed insurability rider allows the insured to purchase additional insurance at specified times without proving insurability, but it does not increase the base death benefit automatically without further premiums.