How do I apply for a life insurance buy back option?

To activate your buy back option, you should contact your insurer or financial adviser once the waiting period, (typically 12 months after your initial claim), has passed. You will generally need to submit a form confirming your intention to reinstate the cover and meet any specific policy terms or conditions. There may also be a timeframe within which you must exercise the buy back option.

Can I use the buy back option multiple times for different claims?

Typically, a life insurance buy back option is designed to allow you to reinstate your life cover one time following a TPD or trauma claim which reduced your sum insured. If you experience another TPD or trauma event after using the buy back feature, your life cover would usually be reduced again. A second buy back may not be available unless your policy specifically includes a feature like trauma reinstatement, which allows multiple trauma claims against that specific cover. Always check your policy's Product Disclosure Statement for full details on how multiple claims affect your buy back eligibility.

Can I remove a buy back option from my life insurance policy?

Yes, you can usually remove optional benefits like a buy back option from your life insurance policy at any time. If the buy back option came with an additional premium, removing it could potentially reduce your overall policy cost. It is advisable to discuss this with your insurer or a financial adviser to understand the implications for your cover and premiums.

Is the buy back option available for life insurance policies held through superannuation?

The availability of a buy back option for life insurance policies held through superannuation can vary significantly. While TPD and trauma cover are often available inside super, the buy back feature is less common for superannuation policies compared to those held outside super. This is due to the different rules and structures governing superannuation insurance. If your life cover is within super, you should consult your super fund or insurer directly to determine if a buy back option is available or applicable to your specific policy.

What is life cover buy back option?

If you claim on a TPD or trauma policy attached to life cover, your life insurance will be reduced by the amount you've claimed.
With a buy back option, you can pay to reinstate your life insurance to its original level of cover.
Buy back benefits can usually only occur 12 months after a claim has been made.

How does the life cover buy back option work?

Say you have a bundled insurance policy with life insurance valued at $500,000 and trauma insurance valued at $100,000. If you suffer a health problem that costs the amount of the trauma insurance, your remaining life insurance would total $400,000.

If there was to be a claim for life insurance after this event, the amount paid out at this point would be $400,000. However, if you have a buy back option and 12 months pass, the life insurance would return to $500,000.

What types of buy back options are available?

There are three types of buy back options available.

TPD buy back. A TPD buy back is a standard buy back option that allows you to reinstate the full amount of your insurance policy 12 months after a TPD claim. A TPD is total and permanent disablement.
Trauma buy back. A trauma buy back works in the same way as a TPD buy back but is for a trauma such as heart attack or illness.
Trauma reinstatement. Trauma reinstatement is an additional option that allows multiple claims to be made against a single trauma policy.

When is buy back available?

A life insurance buy back option is usually available to policies that are bundled with either TPD or trauma insurance. This is a common structure for life insurance policies as it lowers the cost of having separate insurances. It does mean however, that if you make a trauma or TPD claim, your life insurance benefit is reduced by the amount of that claim – which is why many insurers offer a buy back option.

Do I need a buy back back option?

Decide whether you want a buy back option by weighing up the pros and cons

Pros

It's a safety net for your family in case of illness and death.
Without it, the total benefit may not be enough to cover your family's needs.
It's sometimes included in policies free of charge.
It's usually done without the need for underwriting or increases in premiums.

Cons

You sometimes have to pay to have a buy back option included in your cover.
Buy back benefits can usually only occur 12 months after a claim has been made.

Is there an additional cost to include a buy back option in my policy?

Some insurers will include a buy back option free of charge in their policy. Other insurers use a buy back as an option to be bundled and in this case it will usually cost an additional amount. The amount varies and will require comparison between insurance companies.

As a standalone option not bundled with insurance, the buy back option will generally cost more, however it offers flexibility when changing plans. As a bundled option, the buy back policy will be included in the insurance premium.

What are some conditions that come with a buy back option?

Some insurers will require underwriting and new premiums.
A buy back policy will have an expiration date based off of age.
A buy back may be partial or full depending on the terms.
A repurchased term insurance may not be eligible for indexation increases.
A buy back may be dependent on health habits.
A buy back may be based off “12 months” or “1 year” which can affect the repayment date.

Still confused? Speak to a broker for more information

Frequently Asked Questions

To activate your buy back option, you should contact your insurer or financial adviser once the waiting period, (typically 12 months after your initial claim), has passed. You will generally need to submit a form confirming your intention to reinstate the cover and meet any specific policy terms or conditions. There may also be a timeframe within which you must exercise the buy back option.
Typically, a life insurance buy back option is designed to allow you to reinstate your life cover one time following a TPD or trauma claim which reduced your sum insured. If you experience another TPD or trauma event after using the buy back feature, your life cover would usually be reduced again. A second buy back may not be available unless your policy specifically includes a feature like trauma reinstatement, which allows multiple trauma claims against that specific cover. Always check your policy's Product Disclosure Statement for full details on how multiple claims affect your buy back eligibility.
Yes, you can usually remove optional benefits like a buy back option from your life insurance policy at any time. If the buy back option came with an additional premium, removing it could potentially reduce your overall policy cost. It is advisable to discuss this with your insurer or a financial adviser to understand the implications for your cover and premiums.
The availability of a buy back option for life insurance policies held through superannuation can vary significantly. While TPD and trauma cover are often available inside super, the buy back feature is less common for superannuation policies compared to those held outside super. This is due to the different rules and structures governing superannuation insurance. If your life cover is within super, you should consult your super fund or insurer directly to determine if a buy back option is available or applicable to your specific policy.

Thank you for your feedback!

To make sure you get accurate and helpful information, this guide has been edited by Tim Bennett as part of our fact-checking process.

Written by

Gary Ross Hunter

Journalist

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Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

Gary Ross's expertise

Gary Ross has written 522 Finder guides across topics including:

Health, home, life, car, pet and travel insurance
Managing the cost of living

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What is life cover buy back option insurance?

Buy back option insurance let you reinstate life cover if you've made a claim on a bundled TPD or trauma insurance policy.

Key takeaways

How does the life cover buy back option work?