Cost-of-Living Adjustment (COLA)

Published: | Updated: August 14, 2016

Table of Contents

Definition - What does Cost-of-Living Adjustment (COLA) mean?

A cost-of-living adjustment (COLA) refers to a rider to a disability insurance policy that adjusts the benefits the insured would receive if they were to file a disability claim and the disability persists for over a year. Depending on the terms of the rider, this rider increases your monthly benefit annually by a certain percentage based on the consumer price index.

It is also known as a cost-of-living allowance or cost-of-living rider.

Insuranceopedia explains Cost-of-Living Adjustment (COLA)

The purpose of a COLA rider is to ensure disability payments keep up with the rate of inflation; however, it is one of the most expensive riders to a disability insurance policy. It may make more sense for younger policyholders as they have more working years ahead of them and they have more years to collect benefits as well as accumulate compounded COLA increases.

COLA is also applicable to social security (SS) and retirement benefits.

How Well Do You Know Your Life Insurance?

The more you know about life insurance, the better prepared you are to find the best coverage for you.

Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.

Share this:

Connect with us

Email Newsletter

Join thousands receiving the latest content and insights on the insurance industry.