Almost a third of a million armed forces personnel are to be offered life insurance under a scheme provided by the Ministry of Defence (MOD).

Insurers have traditionally shied away from the forces, fearing massive payouts in the event of a major war. Under the new scheme, the Service Life Insurance (SLI) will be offered by private company Sterling Life, with major losses underwritten by the Government.

SLI cover will be available to all personnel, irrespective of the risks to which they are exposed in potential combat situations, although there will be differences in premiums between smokers and non-smokers.

Premiums begin at £5 a month and terminal illness cover is included in the product. Maximum life cover will be set at £200,000, with policies guaranteed for up to 25 years.

Managing director of Sterling Life, John Blundell, said: “The premium levels will be in line with those enjoyed by the civilian population.”

Alan Ingram, the Armed Forces Minister, said: “It gives our personnel the option to take out life insurance cover that is tailor-made to reflect the unique nature of what they do.”

He continued: “Cover is available to each and every serviceman or woman across every ship, unit and regiment at every stage of their career.”