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Service life insurance is a type of insurance provided to those who belong to the armed forces. It is provided either for regulars or reserves of armed forces. For those who are in army, navy or RAF (Royal Air Force) it is hard to find an insurance policy as the risk of something happening is much higher for the person who can at any moment go to the war compared to normal person who sits at home watching TV after the workday. Thus, special type of insurance policy was created to meet such needs.
SLI pays a cash lump sum in case of a claimable event. Usually a claim can be made if the insured person dies or is diagnosed with terminal illness. It must be noted that the amount of cover is set only once and does not change during the whole term of the policy. The same applies also for the premiums that are paid each month. They also do not change throughout the term of the service life insurance policy.
One more thing is that the cover from war and terrorism is provided 24/7 worldwide for those who are regulars or reserves of Armed Forces. Thus, even such high-risk event as war is covered and the person can feel much safer because in case something happens to him, the dependents at least will have much less financial distress.
First of all, SLI is a convenient insurance vehicle as it provides a possibility for those who are part of Armed Forces to be insured. Moreover, the person who wants insurance can choose himself the amount of cover he needs. Maximum coverage is £200,000. The term of the policy can vary from 5 year to 25 years. Furthermore, it can be mentioned that the cash sum that can be paid out in case of a claim is free of liability of income tax and capital gains tax. One more thing is that any additional trades are covered without a necessity to pay any additional extra costs.
It also can be mentioned; that SLI is a convenient tool, as it would take a lot of time for the person that belongs to Armed Forces to find an appropriate life insurance policy, which would cover him. Even if the person leaves the Army the cover is still provided. What is even more important is that those who have some kind of pre-existing conditions can also get a SLI policy. Even more, if the person is diagnosed with a terminal illness, the pay out is also made to the person.
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However, even if this kind of insurance policy has some very attractive advantages, there are many exemptions that should be noted. It is always important to anticipate that the riskier the policy is, the more rules when the pay-out will not be made is set by the insurance company. First of all, the cover is usually provided for the persons who are up to the age of 45. But the insurance policy must end before 65th birthday of the insured person. Thus, those who are between 40 and 45 cannot get maximum term of the service life insurance.
Moreover, if the person has some pre-existing conditions, he must be aware that the policy will not pay out if death occurred or terminal illness was found because of these conditions in the first 24 months of the policy. Furthermore, if the terminal illness is diagnosed, the pay out will not be made if this illness was found in the last 12 months of the policy. This can be an inconvenient condition of the policy because during some part of the term of the policy, the person is uninsured.
One more drawback is that the policy has no cash in value at any time of the policy. Moreover, if the person leaves the Army, protection from war and terrorism also is ceased. However, this is not a very big disadvantage because for normal person the risk to die or have a terminal illness because of war or terrorism events is not that high. It can also be mentioned that SLI has possibility of only one pay out because when the claim is satisfied, the policy ends.
Moreover, the policy will not pay out if in the first 12 months of policy the death or terminal illness occurred because of suicide or self-inflicted injury. In such event, it does not matter whether person was sane or not. The last two situations where the policy will not pay out are CNBR terrorism and private activities. If the death or terminal illness occurs because of CNBR terrorism the policy will pay out only if the person was in that place by legitimate orders or was deployed there by Armed Forces. The same applies to private activities’ condition: if the person is outside the UK and death occurs because of indirect or direct involvement in any conflict zone or military-style operation, the SLI will pay out if only the person was there by official deployment of Armed Forces.