(1) The company shall disclose to the consumer any separate identifiable premium for the accelerated benefit. Those companies indicating that this accelerated benefit is offered without additional premium shall furnish a written explanation to the State Insurance Department when filing the product.
(2) Two (2) options are available to finance the benefit:
(a) The insured may make an additional premium payment or cost of insurance charge; or
(b) The insured may take a present value of the face amount. The calculation would be based on any applicable actuarial discount appropriate to the policy design.
(3) Companies are required to illustrate, by numerical example, any effect the payment of the accelerated benefit has on the face amount, specified amount, accumulation account, cash values, loan balance and future premiums. Each time an accelerated benefit payment is paid, the company is required to send a statement to the policy owner showing the numerical expression stated in this subsection. Upon the payment of an accelerated benefit amount, the company shall issue an endorsement to the policy to reflect any new, reduced, in-force face amount of the contract.
(4)
(a) When an accelerated benefit is payable, the NAIC preference is for a pro rata reduction in the cash value, not a reduction of the full amount.
(b) Alternatively, the payment of accelerated benefits can be considered a non-interest bearing lien against the death benefit of the policy or rider and the access to the cash value shall be restricted to any excess of the cash value over the sum of other outstanding loans and the lien. If the lien approach is used, any accelerated death benefit payments shall first be applied toward repaying the portion of any other outstanding policy loans which would cause the sum of the accelerated death benefit and policy loans to exceed the cash value. Future access to the cash values and to policy loans would be limited to the difference between the cash value and the sum of the lien and any other outstanding policy loans.
(c) In either case, the death benefit may not be reduced more than the amount of the accelerated benefits paid plus any applicable actuarial discount appropriate to the policy design for policies without additional premium payments. The accidental death benefit, if any, in the policy or rider shall not be affected by the payment of the accelerated benefit.
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