Life Cover Buy Back

The Life Cover Buy Back option allows you to buy back the portion of life insurance that reduces when a Total and Permanent Disablement claim is made in a combined policy.

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What is a combined policy?

A combined policy is when multiple types of cover are combined into the one policy, with one premium.

Combined policies are cheaper as a benefit paid out from one policy affects the benefit available for another policy.

For example, if you have $1 million of life cover and $300,000 of Total and Permanent Disablement cover and you make a claim on your TPD policy, your life insurance reduces by $300,000 to $700,000.

How does the option work?

While combined policies are a great way to save on your premiums, the one drawback is the reduction in the other covers in your policy.

Life Cover Buy Back gives you the opportunity to buy back the live cover that is reduced so your benefit is back to it’s original amount, 12 months after the claim was paid.

If you wish to use the option, the policy owner must accept the offer in writing and return to your insurer within 30 days of the offer being made.

When is the Buy Back Option available to purchase?

The Buy Back Option is only available to purchase at the time of the policy application. While select insurers can have this built in, it is generally an additional cost option.

Case Study

Life InsuranceTPD InsurancePremium (monthly)
Initial Policy (pre claim)$500,000$400,000$40.61
Claim Paid($400,000)($400,000)-
Cover during 12 months after claim$100,000$0.00$13.07
Cover available 13 months after claim with buy back option exercised$500,000$0.00$29.56

Paul is a 31 year old Officer Worker who decides to take out a combined policy with a Life Insurance benefit of $500,000 and TPD Benefit of $400,000. He decides to enhance his policy with the Life Cover Buy Back policy option, with a combined monthly premium of $40.61.

Unfortunately three years after taking out the policy Paul is injured in an accident and is rendered totally and permanently disabled. Paul receives a lump sum benefit of $400,000 form his TPD policy which reduces his Life Insurance cover to $100,000 for the next 12 months and his monthly premium to $13.07.

On the 12 month anniversary of his claim, Paul decided to use his Life Cover Buy Back Option, allowing his life cover amount to be returned to $500,000.

Please note that this is an example only and is not indicative of actual premiums or cover available.

Published: April 1, 2015

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