South Carolina Life and Health Practice Exam

Which provision in a disability policy addresses the concern of benefits decreasing over time?

1. Lifetime benefit

2. Cost of living benefit

3. Recurrent disability clause

4. Residual disability benefit

The correct answer is: Cost of living benefit

The provision in a disability policy that addresses the concern of benefits decreasing over time is the cost of living benefit. This provision is designed to ensure that the policyholder's benefits keep pace with inflation and rising living costs during the period of disability. As time passes, the financial impact of being unable to work can increase due to factors like inflation, which can erode the purchasing power of fixed benefit amounts. By including a cost of living benefit, the policy guarantees that if the insured remains disabled, their benefit payments will increase over time, helping them maintain a similar standard of living as when they filed their claim. Understanding the importance of this provision is crucial as it protects individuals from financial difficulties that could arise if they rely solely on a static benefit during a prolonged disability. This aspect is fundamental to ensuring that individuals can cover their essential expenses and maintain their quality of life despite their inability to earn an income.