A common question many people have is, “What is COLA and how does it work?”

COLA stands for the Cost of Living Adjustment rider. The COLA rider is designed to increase your monthly disability benefit while on claim to offset the negative impact of inflation over time. The benefit increase is calculated on either a simple interest or compound interest basis.

The amount of increase can be a fixed rate, such as 3 percent or 6 percent. Or the rate can be variable, in which case it’s usually tied to a national inflation gauge like the Consumer Price Index. The COLA rider does not become active until claim time. You pay for the rider from the outset of the policy. It can add 15-20% to the cost of coverage.

If disabled when younger, the COLA rider would be helpful to have. However it’s an optional feature that is not a requirement for quality coverage terms and definitions.

To be sure your specialty coverage is designed to fit your needs, please give us a call or text us at (704) 707-5788.