New York State Life Insurance Exam Questions Practice Question
Bill has a whole life policy with a face value of $200,000 and a cost-of-living rider. If the consumer price index has gone up 3%, how much may Bill increase the face value of his policy?
Correct Answer: D
Rationale: To determine how much Bill can increase the face value of his whole life policy with a cost-of-living rider, we apply the 3% increase to the original face value of $200,000. This calculation is done as follows:
$200,000 x 0.03 = $6,000.
Thus, Bill may increase the face value by $6,000.
Option A ($300) and Option B ($600) are incorrect as they significantly underestimate the increase based on the 3% calculation. Option C ($3,000) also miscalculates the percentage increase, failing to apply the correct percentage to the full face value.
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