What does a Cost of Living Adjustment (COLA) policy rider do?

A Cost of Living Adjustment (COLA) policy rider is designed to ensure that the benefits of a disability income policy keep pace with inflation over time. When an insured individual becomes disabled and begins to receive benefits, the purchasing power of those benefits can decrease as the cost of living rises. The COLA rider automatically increases the amount of disability income benefits, usually on an annual basis, to help offset the effects of inflation, ensuring that the benefits maintain their value and provide adequate financial support to the insured as living costs increase.

This rider is particularly important for individuals who rely on disability income as their primary source of financial support, as it helps safeguard their financial stability against economic changes over the duration of their disability. By providing this adjustment automatically, the rider enhances the sustainability of the benefits, enabling the insured to manage their expenses more effectively over time.