How does the Cost of Living Rider affect the face value of a policy?

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The Cost of Living Rider is designed to help policyholders maintain the purchasing power of their life insurance benefits in the event of inflation. This rider typically increases the face value of the policy in relation to the Consumer Price Index (CPI). When inflation occurs, the cost of goods and services rises, which can diminish the effective value of a fixed death benefit over time. By adjusting the face value according to changes in the CPI, this rider ensures that the death benefit remains relevant and adequate for the needs of the beneficiary.

This mechanism offers policyholders peace of mind, knowing that their coverage will not lose value due to inflation, making it a beneficial addition to life insurance policies. The other options do not accurately describe the purpose and functionality of the Cost of Living Rider, as they imply a negative or fixed impact on the policy's face value, which contradicts the rider's intent.

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