Describe and differentiate between the “Guaranteed Insurability Option” and the “Cost-of-Living Riders”.

Describe and differentiate between the “Guaranteed Insurability Option” and the “Cost-of-Living Riders”.

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Expert Solution

Guaranteed Insurability option :

In the case of guaranteed insurability option, there is an increase the cover of the base policy only and not of the riders. The cover can be increased without he support of any medical documents. the policy holder can buy additional insurance upto the face value of the policy without nay supporting medical documents upto the age of 40. One of the primary benefits of this option is that it enables the policyholder to increase their insurance coverage offered as their income increases. Therefore, this option allows the policyholder to increase coverage adequately in accordance with their income and family size.

The cost of living rider: Some policies offer a cost of living rider, where the death benefits of the insured is linked to the CPI. This results in an automatic increase in the coverage of the policy holder to beat the costs of inflation. The family of the insured will be receiving more than the face value of the policy at the time of death.

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