Buy back options

Many Australian insurers offer a buy back option as part of the life insurance policies they offer. But what does a life insurance buy back option really mean? And will you benefit from a buy-back option?

Basics & bundling policies

Before we start to explore what life insurance buy back options are, let's go over some basics.

Life insurance in Australia comes in the form of term life insurance.

When purchasing term life insurance, you generally have the option of bundling cover. This means you may attach things like trauma insurance or TPD insurance to your policy for a set amount.

Doing this may reduce your monthly premiums compared to purchasing separate stand alone policies.

How does a buy back option work?

Let's say you have a bundled policy with life insurance valued at $500,000 and trauma insurance valued at $250,000. If you suffer a heart attack and receive a $250,000 trauma insurance benefit payment, the value of your life insurance policy is reduced to $250,000. In the event of a life insurance claim, your loved ones would only receive the remaining $250,000.

However if you purchase a buy back option on your bundled life insurance policy, you will usually be reinstated the full value of your life insurance coverage 12 months later, depending on your insurer.

Buy back options are offered by most Australian insurers at an additional cost.

Please note that there are a select few insurers who offer this free of charge. Call an xLife adviser to find out which insurers offer the buy back option free of charge.

Is having a buy back option beneficial?

Under normal circumstances with a policy which does not have a buy back option, you would only be able to receive one trauma or TPD insurance benefit payment in the event of a claim. Afterwards, may be able to purchase life, TPD, trauma, or income protection insurance from any insurer in Australia due to your recent medical event.

If you do not have sufficient remaining cover for your family should you pass away then a buy back option may be suitable for you.

Another option may be to purchase stand alone trauma or TPD insurance, however the cost of your premiums may be higher compared to bundled insurance policies.

Is a buy back option right for you?

If you are in doubt over whether a life insurance buy back option is right for you, contact an xLife adviser. We can help you compare many policies and offer you free life insurance quotes.

Exclusive Offer! Call xLife on 1300 135 205 today and
save up to 20% on your first year's life insurance premium.

September 2010