PSI Ohio Insurance Practice Exam

Which rider will protect against inflation by increasing disability income benefits annually after the start of a disability?

1. Waiver of premium rider

2. Accidental death benefit rider

3. Cost of living adjustment rider

4. Guaranteed insurability rider

The correct answer is: Cost of living adjustment rider

The choice of the cost of living adjustment rider is the most appropriate in this context. This rider is specifically designed to adjust disability income benefits in accordance with inflation, ensuring that the purchasing power of those benefits is maintained over time. When a policyholder becomes disabled, their income may stop, but the cost of living may continue to rise. The cost of living adjustment rider addresses this issue by increasing the benefits annually based on a predetermined rate, usually tied to inflation indexes. This contrasts with the other riders mentioned. The waiver of premium rider allows the policyholder to skip premium payments while disabled, but does not increase the benefits. The accidental death benefit rider provides additional payout if the insured dies due to an accident, but it does not provide inflation protection. The guaranteed insurability rider allows for additional insurance to be purchased at specified times without proving insurability, but again, it doesn’t offer any adjustments for inflation regarding existing disability income benefits. Hence, the cost of living adjustment rider directly addresses the need to keep disability benefits in line with inflation.