1. For Terminal Illness
There is no charge for this rider until it is used depending on the company. This benefit can be accessed when a person has ben given 12-24 months left to live. The insurance company discounts the death benefit at a predetermined interest rate.
2. For Chronic and Critical Illnesses
The calculation can be slightly more complex here. There are 3 different structures that are used to determine the impact of the acceleration related to the face amount of the policy.
There is the discount method, lien approach, and the additional rider charge. The most common method is the discount method. In this method, the insurance company looks at life expectancy, severity of the illness and the present value of the death benefit to determine what amount can be accelerated.