Final answer:
The provision in an adjustable life policy that allows face amount increases to keep pace with inflation is known as indexing or an inflation protection rider.
Step-by-step explanation:
In an adjustable life policy, the provision that allows an individual to increase the face amount of the policy to help keep pace with inflation is known as indexing or inflation protection rider.
Similar to the concept of cost-of-living adjustments (COLAs) in wage contracts or in government programs like Social Security, indexing in long-term contracts allows for automatic adjustments in value to reflect changes in the purchasing power of money.
Inflation protection in a life policy ensures that the real value of the benefit is maintained, even as the cost of living increases.
In an adjustable life policy, the provision that allows an individual to increase the face amount of the policy in order to keep pace with inflation is called the inflation protection rider.
This rider allows the policyholder to increase the death benefit of the policy over time, typically at specified intervals or when certain life events occur. By increasing the face amount of the policy, the policyholder can ensure that the coverage amount keeps up with the rising cost of living due to inflation.
For example, if the policyholder initially purchased a $500,000 policy and then added the inflation protection rider, they might have the option to increase the death benefit to $600,000 after 10 years. This adjustment helps to maintain the value of the policy over time.