The ability to claim on a protection plan will provide clients with a financial lifeline and the added comfort of not having to worry about their finances. Where a claim is made on a full payment critical illness condition that plan will usually come to an end. This for most will mean that it will be extremely difficult if not impossible to obtain more cover. Where the plan is set up on a life and accelerated critical illness basis it will also mean that the client will lose their life cover. To help keep clients insured even after a claim, some insurers offer buyback options and in this article we explore which insurers offer what type of buyback options.

 

A buyback option provides the client with the ability to reinstate cover after a successful claim without the need for further underwriting.

 

There are three forms of buyback options that could be offered with regard to critical-illness cover:

  1. Critical Illness buyback – Where the claimant is able to reinstate some or all of their critical illness cover after a successful claim
  2. Joint Life Buyback – Where the non-claiming life on a joint life plan is able to reinstate their cover as a single life plan
  3. Life Buyback – Where the claimant is able to reinstate the life element of a life with accelerated critical illness plan after a successful critical illness claim.

Critical Illness Buyback

Currently only VitalityLife offer a critical illness buy back option. This is offered as an optional extra for which an additional charge is made. The option needs to be selected upfront, where new cover can start immediately after a critical-illness claim is settled, which is good news for advisers who don’t want their clients to experience a gap in co

 

When looking at the critical-illness buyback option in more detail, advisers will want to know if the reinstated cover will exclude claims that are due to the condition which led to the original claim, or claims for another condition that is connected to the original claim. Payouts from Vitality are based on the severity of a client’s condition and this will also have a bearing on whether it will exclude claims that are due to the same condition which led to the original claim or a new condition related to it. Vitality will exclude these types of claims on both its propositions only if the claim is for the same or lower severity as the original claim. If the condition worsens, the member may be eligible for an additional payout.

 

With the VitalityLife Comprehensive SIC with Booster only, the Cancer Relapse Benefit will pay out again for any cancer, whether related or unrelated to the original claim. Clients will also get an extra 50 per cent payout that does not depend on the severity of their condition.

Joint Life Buyback

AEGON
Canada Life
Legal & General
Royal London
Scottish Widows
Offer Joint Life Buy Back?
Y
Y
Y
Y
Y
How long after a claim does the non-claimant have to reinstate cover?
6 months
90 days
6 months
6 months
90 days

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Moving on to joint life buyback options, these enable the surviving life assured to buy back their life cover after the death of the other life assured without further underwriting. Our table shows that of the providers listed only Aegon, Canada Life, Legal & General, Royal London and Scottish Widows provide this option.

 

All providers offering this facility include it as standard, so clients will not have to pay extra. New cover can be offered straight away after the claim is settled in all cases, so advisers don’t need to worry about their client being left without cover while everything is being arranged.

 

However, there is some variation is how long the client has to exercise this buyback option after the initial claim is settled. The majority of offerings give clients longer than 90 days to do this. For example, propositions from Legal & General and Royal London allow up to six months. Canada Life and Scottish Widows have a shorter period than all the other providers as they allows clients three months/90 days to exercise the joint life buyback option.

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Life Buyback

Scottish Widows
Vitality
Offer life buy back?
Y
Y
When can the new life cover start?
12 months after the CI claim
Immediately

The final type of buyback option relates to life and accelerated critical-illness, where life cover will be reinstated after a successful claim on the critical-illness element.

 

Here, only VitalityLife and Scottish Widows have this option. Neither provider includes the buyback option as standard, so clients who want this will need to pay a bit more on their premiums for it.

 

Further down the line, where a critical-illness claim has been settled, Vitality give the client up to 30 days to reinstate their life cover but Scottish Widows allow 90 days. New cover with Vitality can start immediately but a Scottish Widows client would have to wait 12 months after the critical Illness claim is settled. Neither provider excludes claims on the reinstated life cover if they are due to or related to the condition that led to the original critical-illness claim. This means that clients who would rather not go through the underwriting process again are not disadvantaged by more restrictive cover that reduces the chance of a payout.

 

Buyback options are a valuable feature allowing clients, at the most difficult time and when the power and value of their cover has been strongly illustrated through a successful claim, to reinstate cover that would otherwise be lost. Advisers and clients alike should ensure these options form part of every protection conversation.

 

Vitality are particularly strong as they are the only insurer to offer both Critical Illness and Life buyback options. Whilst there are additional costs for these, there are very few restrictions on the new cover. Scottish Widows are also strong as they offer both joint life and life buy back options.