When the London bombings occurred on July 7th in 2005, many people felt a sense of unease and concern about living in Great Britain's capital. There were reports that people were too frightened to use the underground train network and then of course there were many of those who knew the victims of the tragedy.

So it is no surprise that after the event has occurred, more people have chosen to take out life insurance policies. While insurance firms say that the number of people taking out Payment Protection Policies has been on the general decline over the years, the Association of British Insurers recently reported that the number buying life insurance products rose slightly last year.

In fact, life insurance was worth £1 billion for the insurance industry in 2005. When asked the question whether the rise is due to an anxiety about terror threats, the ABI says that it could be the case.

Afterall, when the US terror attacks happened on 9/11/2001, the number of people taking out life insurance rose slightly the following year, reflecting the mood of the nation.

Unlike travel insurance policies, life insurance does not contain terrorism exclusions and so if you die as a result of a terror attack, the insurance firm will pay out on the claim. This would have most certainly been the case with respect to the victims of 7/7 in London.

However, the ABI says that group life insurance policies may contain these types of exclusions because of the accumulated risks that are possible in one location. What this means is that you need to read the terms and conditions of your policy because they can vary.

Even if more people do not take out life insurance as a direct result of terrorism, perhaps the threat makes them value their life more or think about what would happen to their family should they do become a victim of another sort of tragedy.

What Life Insurance does, is offer financial protection in the event of an early death if you have a family dependent on your earnings. But as well as this, it can also be a means of saving.

You can get endowment policies which you can pay premiums for an agreed number of years, say 15, then at the end of this time you can receive a lump sum. This is the sum insured together with bonuses. That is, if you take out a ‘with-profits' policy. If you take out a policy called a Unit-Linked Endowment, the lump sum is the return of all money invested together with the investment growth. Even if you die before the maturity date, the insurance company will pay the sum insured or the value of the policy at the time, if it is greater.

Most policies have optional extras, such as the waiver of premiums if you are unable to pay them at such stage, or critical illness insurance. But what you need to remember is that a life insurance policy is a long term commitment so if an incident, such as a terror attack, does occur, your family is protected. It is not designed for you to cash in early. Brokers and financial advisers can off help deciding what policy you should take out. But never surrender a life insurance policy without taking out expert advice.