The inbuilt ‘buy back’ benefit basically allows clients to restore their level of life and trauma cover (but not TPD cover) to the level it was before the claim payment which reduced their sum insured amount. Clients cover will automatically have their cover reinstated on the last day of the buy back period (no later than 12 months after the claim payment date) Let’s understand the specifics:

 

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:

A great thing about the Buy Back benefit is that the same premium conditions at commencement of the policy, including any loadings and exclusions, remain in place when the cover is reinstated. So, if the policy originally had standard rates or certain loadings and/or exclusions at commencement of the policy, this will be applied to the reinstated cover. Additionally, if the Trauma cover is linked or a rider to Life care, rider rates will still apply. And if your client has a level premium policy the premiums will still be calculated on their age next birthday on the date the cover first started and not age next birthday.

The advantage for clients and advisers is that cover is automatically reinstated. The client doesn’t have to complete any request form and no further health evidence or medical underwriting is required by the client. The client is sent a courtesy letter before their cover is reinstated with information detailing their total sum insured amounts, effective date of the reinstatement and the premiums payable.

If you would like to learn more, please call 1800 805 686 Monday to Friday 9:00am to 5:00pm (AEST/AEDT)