A new law on third party rights, The Contract (Rights of Third Parties) Act 1999, came into force this week, which will affect group income protection, group critical illness and group personal accident plans.

The new law gives employees who are third parties the right to be consulted, to negotiate the terms and seek redress if contracts are not fulfilled.

It means insurers and employees should decide what level of rights to give the employee, and make these rights clear from the outset.

Eugene McCormack, marketing director of income protection insurer Unum, said: "Advisers should check when reviewing group schemes that the position of third party rights is clear and that the employer communicates this to all employees."