Massachusetts Health & Accident Insurance Practice Exam

Which rider allows benefit amounts to adjust on the anniversary date of the contract?

1. Social Security Rider

2. Exclusion Rider

3. Nondisabling Injury Coverage

4. Cost-of-Living Adjustment Rider (COLA)

The correct answer is: Cost-of-Living Adjustment Rider (COLA)

The Cost-of-Living Adjustment Rider (COLA) is designed to ensure that the benefit amounts of an insurance policy can increase on the anniversary date of the contract, typically in line with inflation or a specified percentage. This adjustment is important as it helps policyholders maintain their purchasing power over time, especially in the context of rising living costs. By incorporating a COLA rider, the policy guarantees that the benefits received by the insured will increase periodically rather than remain fixed, which could diminish in value due to inflation. Other options, such as the Social Security Rider, Exclusion Rider, and Nondisabling Injury Coverage, serve different functions within health and accident insurance policies. For instance, the Social Security Rider provides additional benefits if the insured becomes eligible for Social Security disability benefits, while the Exclusion Rider specifies certain conditions or treatments that are not covered by the policy. Nondisabling Injury Coverage focuses on providing benefits for injuries that do not result in a permanent disability. None of these options address the adjustment of benefit amounts over time in the manner that the COLA rider does.