Life Cover Buy Back

The Life Cover Buy Back Option (Often built-in free) allows you to re-purchase the portion of life insurance reduced in a combined policy when a full trauma claim is paid. This can be a great way to maintain your full life insurance benefit even if you suffer a critical illness and a claim is paid.

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Why should I purchase this option?

You may want to purchase the Buy Back Option if you want to ensure your life cover is maintained for the life of your policy,  regardless of any critical illness claims paid.

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 life cover that is reduced so your benefit is back to its 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 should I purchase this option?

You will generally need to purchase or choose this option when you are applying for your policy and will not be able to take it out after you have applied for cover.

Remember this option is only available in a combined policy and is not available with stand alone trauma cover.

Case Study

Life InsuranceTrauma InsurancePremium (monthly)
Initial Policy (pre claim)$1,000,000$500,000$120.56
Trauma Insurance Claim Paid($500,000)($500,000)-
Cover during 12 months after claim$500,000$0.00$35.52
Cover available 13 months post claim with option exercised$1,000,000$0.00$67.29

Sarah is a chef who decides to take out $1 million of life insurance and $500,000 of life cover in a combined policy. As part of her policy, she decides to include the buy back option.

Unfortunately Sarah is diagnosed with cancer and is forced to undergo chemotherapy and surgery as part of her treatment. Due to her condition, Sarah makes a successful claim on her trauma cover and receives her $500,000 lump sum benefit.

As a result of her receiving her benefit, Sarah’s life insurance cover reduces to $500,000, also reducing her monthly premium. 12 months after her claim, Sarah receives an offer from her life insurance provider to exercise the Buy Back Option, which she chooses to do, increasing her life insurance cover back up to the pre-claim $1,000,000 amount.

Published: April 11, 2017

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