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A 25-year-old purchases a whole life policy with a Guaranteed Insurability Option (GIO) rider. Which of the following correctly describes how the rider operates?
At specified option dates or alternate life events, the insured may buy additional permanent coverage at attained-age rates with no evidence of insurability
BThe insured may purchase unlimited additional coverage at the original issue-age premium rate at any time before reaching age 65, with no proof of insurability required
CThe insurer guarantees to convert the base policy to a higher face amount whenever the insured's annual income rises by 10% or more, subject to evidence of continued insurability
DThe rider automatically increases the policy's face amount by a fixed 5% each and every year regardless of any election or request made by either the insured or the premium-paying payor
Why this is the answer
The Guaranteed Insurability Option (also called Guaranteed Insurability Rider) protects an insured against future declines in insurability. On specified option dates — typically every three years from issue through about age 40 — the insured may purchase a defined amount of additional permanent coverage with no medical underwriting. Many riders also recognize 'alternate option dates' triggered by life events: marriage, birth or adoption of a child, sometimes home purchase. Critically, the new coverage is priced at the insured's attained age, not the original issue age, so the rider guarantees insurability — not pricing.
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