What is a cost of living rider for life insurance?

A cost of living rider, also referred to as an inflation rider, is an optional add-on to a life insurance policy that increases your coverage amount over time to keep pace with increases in cost of living. Every time your coverage amount goes up, your policy's premium will too. This type of rider can help offset the impact of inflation on your policy's value.

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How do cost of living riders work?

A cost of living rider increases your coverage amount/death benefit over time, though the exact amount varies by insurer. Some cost of living riders are pegged to the Consumer Price Index (CPI), which means your coverage amount will increase based on the average price changes of consumer goods and services over time. Other cost of living riders increase your coverage at a set percentage or amount at periodic intervals, independent of the CPI.

If you're interested in a life insurance policy with a cost of living rider, ask your insurer how they handle coverage increases over time.


Inflation is the general increase in prices for goods and services over time — everything from eggs to life insurance.

How does inflation impact life insurance?

As the price of everyday goods and services goes up, the buying power of your policy's death benefit goes down. In other words, your death benefit dollars won't go as far as they did when you bought your policy. For example, if you bought a life insurance policy in 2003 with a death benefit of $400,000, and wanted to buy a new one today with the same buying power, you would need a death benefit of $671,676 in 2023 dollars, according to the U.S. Bureau of Labor Statistics' inflation calculator.

Keep in mind that inflation is primarily a concern for life insurance policies that are active for decades. So if you're looking at a 20- or 30-year term life policy or permanent life insurance, then you should consider a cost of living rider to help maintain the value of your policy. Your beneficiaries will have an easier time affording everyday expenses, and you'll have greater peace of mind as well.

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Please note: The above is meant as general information to help you understand the different aspects of insurance. Read our editorial standards for Answers content. This information is not an insurance policy, does not refer to any specific insurance policy, and does not modify any provisions, limitations, or exclusions expressly stated in any insurance policy. Descriptions of all coverages and other features are necessarily brief; in order to fully understand the coverages and other features of a specific insurance policy, we encourage you to read the applicable policy and/or speak to an insurance representative. Coverages and other features vary between insurers, vary by state, and are not available in all states. Whether an accident or other loss is covered is subject to the terms and conditions of the actual insurance policy or policies involved in the claim. References to average or typical premiums, amounts of losses, deductibles, costs of coverages/repair, etc., are illustrative and may not apply to your situation. We are not responsible for the content of any third-party sites linked from this page.