What Is a Cost-of-Living Rider for Life Insurance?

A cost-of-living rider in life insurance is an extra feature that increases your death benefit to keep up with inflation.
Robin Hartill, CFP®
By Robin Hartill, CFP® 
Edited by Lisa Green Reviewed by Tony Steuer

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A cost-of-living rider is an optional add-on when you buy a life insurance policy that gradually increases your death benefit so it doesn’t lose value to inflation. Sometimes it’s called a cost-of-living adjustment rider, COLA rider or inflation rider.

A COLA rider typically increases coverage in step with the consumer price index. As your death benefit increases, your life insurance premiums often also rise.

If you’re buying a policy to replace your income for financial dependents, the payout after years of inflation may cover fewer expenses than you intended. Suppose you’d purchased a 30-year term life insurance policy with a $650,000 death benefit in 2005. The cost of housing, groceries, vehicles and college tuition have all increased substantially since then. By 2024, you'd need a $1 million life insurance policy to provide the same amount of buying power.

With a cost-of-living rider, you’d be able to purchase additional insurance each year to offset inflation. For a COLA rider, you don’t need to provide proof of insurability by undergoing a life insurance medical exam or new underwriting

New York State Department of Financial Services. Optional Riders and Supplemental Benefits. Accessed Jan 30, 2024.
. However, you may pay more per dollar of coverage for the extra insurance, since you're now older and pose more risk to the insurer.

Cost-of-living riders can be added to most types of life insurance, including term life policies and permanent policies, such as whole life and universal life. However, many insurers won’t let you add life insurance riders to an existing policy, so if you’re interested in a cost-of-living rider, be sure to ask about this feature when you’re buying your policy.

Learn more about buying life insurance

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