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Life Cover Buy Back Options and Reinstatement Insurance

Did you know that when you have a combined life insurance and TPD policy and receive a payout for total and permanent disablement, your overall sum insured reduces by the claim that’s been paid? This means, your loved ones will receive less money should you pass away. This is also the case if you bundled life cover with a trauma insurance policy.
Fact Checked

Updated: 29 May 2024

Something else you might not be aware of when you have a critical illness policy is that should you suffer one of the illnesses listed in your product disclosure statement (PDS) and a claim is paid out, then you have no protection left should you be unlucky enough to suffer an unrelated illness later in life.

In this article, we aim to provide you with clarity on the availability of life cover buy back options, whether you should consider it and how to get it.

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What are life cover buy back options and do you need it?

Life insurance buyback options are designed to reinstate the full value of your life cover after you’ve received money from a successful TPD or Trauma claim if your life insurance benefit was reduced under a combined policy. Buyback benefits can usually only occur 12 months after your claim has been submitted and paid, depending on the insurer.

For example, if you combine life insurance with TPD for a total of $1 million sum insured, and you become totally and permanently disabled and claim $350,000, then the life cover buyback option allows you to restore that $350,000 after a specified period, so if you were to pass away your loved ones receive the full $1 million, instead of the remaining $650,000.