ex-CMLA Product – Buy Back Benefit and TPD/Trauma Cover

The Buy Back Benefit under an ex-CommInsure lump sum policy is a standard, built-in feature. The advantage for our clients is that they never need to worry about continuation of cover on their first claim – cover reinstatement is already built-in.

When exercised under the Buy Back Benefit, Life and Trauma cover (but not TPD) is automatically reinstated – no further medicals and no messy paperwork for the client or adviser to complete. Life Care Buy Back also applies after a partial trauma claim. Reinstated cover under the Buy-Back benefit will continue to receive the indexation benefit after it has been reinstated if the client has opted to receive the automatic indexation benefit.

An additional benefit is that under the Trauma Buy Back benefit, the client will not need to meet the three-month Qualifying Period on the reinstated sum insured amount.

Where a client is paid a claim benefit on his or her policy and the policy structure includes either rider cover or linked cover (i.e. Flexi-linking, Split TPD, Split Income Protection) the client’s sum insured is reduced by the claim benefit amount paid.

Example:
George has two linked policies with $1 million Life Care and TPD (total and permanent disability) Cover and, $300,000 Trauma Cover.

Unfortunately, George is subsequently diagnosed with severe prostate cancer (i.e., classified with a Gleason score of 6) and is paid a full Trauma benefit of $300,000 to cover excess medical expenses, rehabilitation and time off work for his recovery. George’s sum insured is reduced as a result of the claim to $700,000 Life Care and TPD Cover and $0 Trauma Cover.

Indexation will still apply to the remaining cover during the buy back period. In addition, when the cover is reinstated, the client can continue to receive indexation on the total sum insured in the future and not just the reduced sum insured amount. From the example used above, let’s assume an applicable CPI rate of 3%. George’s new sum insured amounts after the 12 month ‘buy-back’ period will be:

Things to consider with the Buy Back Benefit

• Unless there have been consecutive partial trauma claims, the buy-back period generally won’t be activated by a partial trauma claim unless the sum insured is reduced to less than $10,000
• The trauma cover buy-back benefit can only be applied once. For example, if the client suffers two consecutive claimable events resulting in a full benefit payable, the buy-back benefit is not available after the second claim is paid out and the client’s cover will remain at the reduced sum insured level. However, the Life cover can be bought back a second time
• The reinstated cover amount will also be restricted in ability to claim for related events. Using our example, if George had another cancer event, he would not be able to claim again for cancer under trauma. If, however he had a linked life cover policy and is diagnosed as being terminally ill or dies as a result of cancer, then the Life Care benefit would be payable. If your client purchased the Trauma Reinstatement Booster option another payment might be payable under this scenario
• Once Trauma Cover Buy Back benefit has been activated, other benefits such as Loyalty Bonus, Guaranteed Insurability Option and Severe Hardship Booster will no longer apply
• Trauma Cover Buyback will not apply for Trauma conditions that occurred after the client’s has reached the policy anniversary date before 70
• Trauma Cover Buy back will not apply if a Trauma Cover benefit is paid for loss of independent existence
• Buy back does not apply to TPD Cover or Child Cover
• Life Care Buy Back does not apply if part of the TPD Cover benefit for Partial and Permanent Disability has been paid
• In a split TPD linked policy, TPD Cover reduced by a trauma claim cannot be bought back
• A Trauma cover claim won’t be paid under reinstated Trauma cover for paraplegia, quadriplegia, hemiplegia, diplegia or tetraplegis as a result of a stroke if the original claim was paid for any condition listed under heart and vessels
• A Trauma cover claim won’t be paid under reinstated Trauma cover for any condition listed under heart and vessels if the original Trauma claim we paid was for paraplegia, quadriplegia, hemiplegia, diplegia or tetraplegia as a result of a stroke
• Buy Back doesn’t apply if Life Care, Trauma Cover or the policy ends before the cover is due to be reinstated.

For a full list of exclusions, please refer to the Tailored Protection Product Disclosure Statement.