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Which insurers have the best buyback options?

Which insurers have the best buyback options?

In reading this article you will understand

  • Which providers allow clients to reinstate cover free of underwriting after a successful claim through buyback option
  • The range of buyback options available and which providers offer what
  • Restrictions that apply in terms of when the options can be exercised, when cover can go in force and how conditions that led to the initial claim are covered

Which insurers have the best buyback options?

Clients do not tend to think about the implications a successful claim will have on their ability to obtain more cover afterwards. It is usually enough for them to know they have cover in place that they can claim on if they need it, so they don’t give it another thought.

However, claiming on a full payment critical illness condition will usually bring that plan to an end and it may be difficult, if not impossible, to obtain cover again. If a plan is set up on a life and accelerated critical illness basis, a successful claim will also bring the life cover to an end. To help clients remain insured even after a claim, some insurers offer buyback options. In this insight we explore which insurers offer what type of buyback options.

A buyback option allows cover to be reinstated for a client after a successful claim without the need for further underwriting, which is always an attractive feature. There are three forms of buyback options that could be offered:

  • Critical Illness buyback – Here, the claimant is able to reinstate some or all of their critical illness cover after a successful claim
  • Joint Life Buyback – Here, the non-claiming life on a joint life plan is able to reinstate their life cover as a single life plan
  • Life Buyback – Here, 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

Our chart shows that VitalityLife PPP is the only provider of the 12 listed to offer a critical-illness buyback option. It does so as an optional extra for which an additional charge is made. However, the buyback option is included as standard on VitalityLife PPP’s Mortgage Serious Illness Cover, so an extra charge will not apply in this instance.

New cover can start immediately after a critical-illness claim is settled regardless of which VitalityLife PPP plan is chosen. This is a useful feature because clients will experience no gaps or avoidable delays in cover as a result of reinstating cover. However, clients are under no pressure to rush their decisions on whether to exercise a buyback option as they have up to 30 days to do so. This will be a fairly familiar period to many clients at is in line with the cooling off periods or notice periods used by companies in other areas of their lives, such as digital TV providers and mobile phone companies.

One important consideration for advisers is whether 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. In both these cases, VitalityLife PPP will not apply exclusions, which is clearly good news for clients.

Joint Life Buyback Option

* Joint life buyback options are unnecessary for Guardian’s plans because joint life cover would be established as two single life plans under its dual life approach.

Under a joint life buyback option, the surviving life assured is able to buy back their life cover after the death of the other life assured without further underwriting. Our chart shows that of the 10 insurers listed, only Canada Life, Legal & General, Royal London and Scottish Widows provide joint life buyback options.

All four insurers that offer joint life buyback options do so as  standard, so clients will not have to pay extra for them. New cover can be offered straight away after the claim is settled in all cases, so there is no need for advisers to worry that their client being left without cover while everything is being processed.

However, there is an even split among the insurers as to how long the client has to exercise this buyback option after the initial claim is settled. Legal & General and Royal London both give clients 6 months to exercise this option. Canada Life and Scottish Widows allow a shorter period for clients to exercise their join life buyback options at three months/90 days.

Life Buyback Option

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.

As our chart shows, only Scottish Widows and VitalityLife PPP offer clients this option. VitalityLife PPP charges extra for this, but takes a different approach where clients choose its Mortgage Serious Illness Cover – life buyback options are included as standard on this particular plan.

Once a successful claim on the critical-illness element has been settled, VitalityLife PPP allows the client up to 30 days to reinstate their life cover. Scottish Widows gives clients more time than VitalityLife PPP to exercise life buyback options – it allows three months/90 days.

New cover with VitalityLife PPP 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.

Although relatively few insurers offer buyback options, they are worth having because the need to cover a mortgage or financially support a family can remain after a successful claim. Starting a new application would mean going through underwriting with a declined application a real possibility at the end of it. A buyback option prevents this happening, so is a real plus for advisers and their clients.

Overall, Vitality is a particularly strong player in this market as it is the only insurer to offer both critical illness and life buyback options. While there are additional costs for these in some cases, there are very few restrictions on the new cover. Scottish Widows is also worthy of a mention for offering both joint life and life buyback options.

Things to reflect on for CPD:

  • What are the your three learning points from this article. Reflect on how the differing provisions for buyback option on different plans may affect your recommendations for different client demographics.
  • Required further reading: Buyback option only come to life after a claim. This related Protection Guru article examines critical illness claims stories. Watch the videos and identify 3 key best practice learning points that can help you in your conversations with clients when dealing with a claim.
  • Required further reading: This related Protection Guru article looks at how providers compare in their support to both clients and advisers during the claims process. What are the top three learning points from this article? Reflect on how the differing service levels can affect the clients and advisers overall claim experience. What is the most important thing you would like providers to change that would improve the service to your clients?

About The Author


As well as writing for Protection Guru, Amanda Newman Smith is the feature writer at adviser trade publication Money Marketing. She started her career at a local newspaper in London and has been writing about protection products since 2000. In her previous role at Money Marketing she specialised in analysis of new financial products, including those in the protection market. Having recently become interested in antiques, Amanda spends her free time with her husband and their three children, hunting for unloved pieces to restore to their former glory.

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