Which statement about a life insurance policy's cost-of-living (COL) rider is correct?

A cost-of-living (COL) rider in a life insurance policy is designed to allow the policyholder to adjust the death benefit amount in accordance with inflation, thereby helping maintain the purchasing power of the benefit over time. One of the key features of such riders is that they enable increases in the death benefit without the need for proof of insurability. This means that as the cost of living rises, the death benefit can be adjusted upward automatically or at specified intervals, without requiring the policyholder to undergo a medical examination or provide evidence of health status. This feature offers valuable flexibility and security to policyholders, ensuring that their beneficiaries will receive a death benefit that reflects current economic conditions rather than a fixed amount that could diminish in value due to inflation.

The other options do not align with the primary function and characteristics of COL riders. For example, while a COL rider can be beneficial with various types of policies, they are not limited to term insurance; they can also be found in permanent policies. Additionally, COL riders typically provide variable increases tied to specific metrics of inflation, rather than fixed annual increases, and they are explicitly designed to adjust according to inflation rates rather than ignore them.