18 min Read
20 May 2020

Written by Andy

Life insurance and the Armed Forces

Life insurance and the Armed ForcesIn this article we take a look at life insurance for the armed forces. We explain how the death in service scheme works and provide guidance on how and where you should buy additional life insurance that covers you for your specific role in the armed forces. We also explain how you can get up to £100 cashback, read on to find out more.

What is life insurance?

Life insurance is an insurance policy that pays out either a regular income or lump sum should you die within the policy term. The policy term can be tailored to suit your needs, meaning you can choose for the policy to run until your intended retirement date, the end of your mortgage or perhaps just until your children reach adulthood.

What is service life insurance?

Service life insurance is the generic term given to a life insurance policy that covers someone who works in the military. It can either be in reference to the Armed Forces Compensation Scheme (AFCS), a scheme that compensates those that are injured or killed by active service or it can be in reference to a personal life insurance policy that simply covers those that work in the armed forces. We explain more about both types of life insurance later in this article.

Do you need life insurance in the armed forces?

As a member of the armed forces, you are automatically entitled to receive benefits via the Armed Forces Compensation Scheme (AFCS) if you are injured or killed in service. Depending on your personal situation, you may benefit from having additional life insurance, especially if you have people who rely on your income such as a partner or children or if you have a large debt such as a mortgage. It is also important to note that the AFCS may only pay out if you are injured or killed in active service, so you may not be covered if something were to happen to you outside of work.

What is the Armed Forces Compensation Scheme (AFCS)?

The Armed Forces Compensation Scheme (AFCS) compensates for any injury, illness or death which was caused by service on or after 6 April 2005.

The compensation can be categorised into two different types:

  1. A tax-free lump sum payment, awarded for pain and suffering caused
  2. A Guaranteed Income Payment (GIP) which is provided tax-free. It is paid monthly and is index-linked (meaning the amount received keeps pace with inflation)

The rules of the scheme (and the value of the payments awarded) are set by the government and are calculated based on a tariff of injuries. Further details can be found by visiting the AFCS legislation page on the .gov.uk website.

Can I have a personal life insurance policy and a death in service benefit?

Yes. The Armed Forces Compensation Scheme (AFCS) is entirely separate from any other personal policy you may already hold or intend to hold, such as a personal accident insurance or life insurance policy. In addition, your personal life insurance policy is not considered when determining an AFCS award.

What type of life insurance policies are available for members of the armed forces?

There are many different types of life insurance you could consider. The most popular type of life insurance is level term assurance, a simple life insurance policy that pays out a guaranteed lump sum if you die within the policy term. The premiums you pay and the amount you are insured for remains the same throughout the term of the policy.

There are other types of life insurance that you can purchase, such as mortgage life insurance, whole of life cover and family income benefit and we go into more detail in our article 'Types of life insurance explained'.

For the purposes of this article, we will concentrate on the most popular type of life insurance, level term assurance.

How does life insurance for the armed forces work?

As we have already explained, as a member of the armed forces, you automatically qualify for the Armed Forces Compensation Scheme, which provides compensation in the event that you are injured or killed in service. The truth is that for most people, the amount your family would receive from an AFCS award will not be enough, especially if you have a mortgage or family that rely on your income. Additionally, an AFCS award may only be granted if you are killed or injured in active service and so making sure you have your own private life insurance arrangement is recommended.

How to get life insurance for the military?

You should be able to purchase a personal life insurance policy from most traditional life insurance providers however the price you pay will depend on a number of factors including the amount of cover you need, the term of the policy, your age and also the type of job you do within the armed forces. It is likely you will be asked to complete an 'Armed Forces Questionnaire' which will ask for more details on your role, rank and duties.

Insurance companies will want to assess the risk that you pose and every insurance company will have slightly different underwriting criteria. It is important, therefore, that you choose the right insurance company from outset as it will mean you can save time and money. We explain more about how to buy the best life insurance later in this article. The process is the same whether you work in the Army, Navy, Air Force, Marine Corps, Coast Guard or the Reserves.

Alternatively, you could look at the PAX Insurance Scheme, which is contributed to by the MOD and provides life and personal injury insurance at reasonable rates for service personnel. It may be sensible to speak to an independent life insurance specialist first to get the best value quotes from a range of traditional insurers. You can then compare that price with the price offered by the PAX insurance scheme.

Can I get cover for my partner/joint policy?

Yes, when buying personal life insurance for the armed forces you can choose to add a partner. The cost will be based on insuring both lives and so the premium will be adjusted to accommodate the additional risk. Some people choose to split the cover and have two individual policies (rather than one joint policy) as it means that there is the potential for both policies to pay out and, additionally, if one person dies, the surviving partner retains their own life insurance policy.

What is covered with life insurance for armed forces?

A life insurance policy for the armed forces will pay out for death in any event, including death as a result of active service. An insurance company will assess the risk that you pose by asking you to complete an 'Armed Forces Questionnaire' at the time that you apply for the cover. Typically, life insurance is sold with very few exclusions, so once you are accepted, the policy is guaranteed to pay out for death in any event. See below for the exclusions that would usually apply to a life insurance policy.

What exclusions are applied to life insurance for armed forces?

The only exclusions that would normally apply to a life insurance policy for military personnel are as follows:

  • Suicide in the first 12 months of the policy
  • Death arising from drug or alcohol abuse

How much military life insurance cover do you need?

The amount of life insurance you need will likely depend on a number of factors. Life insurance should be tailored to your own specific needs and so it makes sense to get advice when considering how much cover you may need. We explain where you can get free life insurance advice later in this article.

When considering how much life insurance you need, you should consider the following:

  • Whether you die in active service and therefore whether you are covered by the Armed Forces Compensation Scheme
  • Do you have a mortgage?
  • Do you have any dependents and if so, how many and how old are they?
  • How much do you earn?

Do you need critical illness cover?

Critical illness cover pays out a guaranteed, tax-free lump sum if you are diagnosed with a specific illness that is listed on the insurance policy. You are more likely to suffer a critical illness than you are dying and so the policy is more expensive.

Adding critical illness insurance to a life insurance policy is down to personal choice and the deciding factor is often down to cost. It is common practice to opt for a smaller amount of critical illness insurance to sit alongside a larger life insurance policy, meaning there is an element of critical illness insurance in place. A specialist life insurance broker should be able to provide tailored quotes to suit your budget.

How much does life insurance for the armed forces cost?

Life insurance for military personnel will vary based on a number of factors, including:

  • How much cover you need
  • Over how long you want the cover to last
  • Your current age
  • Your current health
  • Whether you smoke
  • The type of job you do in the armed forces

An insurance company is likely to take a keen interest in your job and the type of duties you carry out on a day to day basis. You will be required to complete an 'Armed Forces Questionnaire' and each application will be assessed on a case by case basis.

Where best to buy life insurance for the armed forces?

It is important to understand the likely impact that your job will have on your life insurance premiums. If your job is deemed to be high-risk, then you may have to pay an increased premium.

An example of low-risk jobs in the armed forces are:

  • Office-based personnel carrying out administrative duties
  • Engineer / Technician
  • Logistics & Support
  • Chef
  • Music & Ceremonial

An example of high-risk jobs in the armed forces are:

  • Paratrooper
  • Front line soldier
  • Special Forces
  • Pilot
  • Diver

Not every insurance company will treat you the same however and so it is important to shop around and go with the company that offers the most cost-effective premium. It is rarely the case that the cheapest insurance company at quote stage is the cheapest insurance company once the application has been fully assessed. It is crucial therefore to speak to an independent life insurance specialist who can put you in touch with the right insurance company from the outset.

LifeSearch is one of the UK's biggest life insurance brokers and specialises in life insurance for the armed forces. The advice is free and they will handle everything from completing the application forms to chasing the insurance company. Additionally, LifeSearch can help put your policy into trust, meaning any potential payout is not subject to inheritance tax. Simply complete this short form to receive a callback at a time that suits you. Don't forget, if you decide to take out a policy you can qualify for up to £100 cashback.

Best life insurance providers for the armed forces

There is not one 'stand-out' life insurance provider that is best for military personnel, as each insurer has its own set of underwriting criteria. As explained in the section above, it is often best to speak to a life insurance specialist who can ask the relevant questions and speak to the insurance companies on your behalf in order to work out which one is best for you. That said, Royal London and AIG are probably best avoided as they tend to be quite expensive for those that work in the armed forces. Legal & General, on the other hand, tend to represent good value for most.

Tips on how to reduce the cost of an armed forces life insurance policy?

There are a number of ways you can bring down the cost of your military life insurance and we explain a few of these options below:

  • Claim a refund on your expenses - If you carry out high-risk duties as part of your role within the military, for example, parachuting, flying, diving, bomb disposal etc, you may qualify for a refund of the additional premium you have to pay. You would need to check the Service Risks Insurance Premium Refunds scheme (SRIPs) to see if you qualify. Check out the document for expenses and allowances (JSP 752) and jump to chapter 17, section 4.
  • Don't over-insure yourself - Check your existing life insurance benefits before arranging new cover. It is likely that you are covered by the Armed Forces Compensation Scheme (AFCS) so check how much you are already covered for before buying extra life insurance, as you may already have enough. If you have a mortgage or anyone that relies on your income such as a partner or children then it makes sense to have extra life insurance in place.
  • Shop around - The best way to guarantee the best value life insurance for the armed forces is to shop around; speak to LifeSearch, an independent life insurance broker that specialises in insuring those in the armed forces.

 

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