What is accident, sickness and unemployment insurance?
Accident, sickness and unemployment insurance (ASU) provides a monthly benefit if you are unable to work due to sickness, an accident, or involuntary redundancy. The policy is designed to help cover essential costs such as mortgage or loan repayments, rent, and other household expenses.
How does ASU insurance work?
When you take out ASU cover, you choose the level of benefit you require, typically a percentage of your monthly income. If you need to make a claim, the insurer pays out a monthly benefit to help cover your financial commitments during your period of inability to work.
Types of ASU insurance
Accident and Sickness Insurance: Provides income protection if you cannot work due to illness or injury.
Unemployment Insurance: Covers your income if you lose your job through redundancy.
Accident, Sickness and Unemployment Cover: A comprehensive policy that includes both sickness and unemployment protection.
ASU cover vs. payment protection insurance
ASU insurance is sometimes confused with payment protection insurance (PPI). While both offer financial protection, ASU provides more comprehensive coverage for those unable to work due to health or redundancy, whereas PPI typically covers specific debts, such as a loan or credit card.
ASU vs. mortgage payment protection insurance
Mortgage payment protection insurance (MPPI) is a type of ASU policy that specifically covers mortgage payments. This ensures that if you are unable to work, your mortgage repayments are still made, preventing repossession.
Who should consider ASU insurance?
Individuals with financial commitments such as mortgages or loans.
Self-employed workers without access to statutory sick pay.
Employees with limited sick pay or redundancy packages.
Anyone who wants added security in case of unexpected life events.
What does ASU insurance cover?
Monthly benefit payments if you are unable to work.
Coverage for mortgage or loan repayments.
Protection for general monthly outgoings.
Support for up to 12 or 24 months, depending on the policy.
What ASU insurance does not cover
Pre-existing medical conditions.
Redundancy as a result of misconduct.
Voluntary resignation or early retirement.
Long-term disability or chronic illness beyond the policy term.
The role of statutory sick pay and sickness insurance
Statutory sick pay (SSP) in the UK provides limited financial assistance if you are unable to work due to illness. However, it is often insufficient to cover all monthly expenses, making additional sickness insurance essential for many.
Unemployment insurance cover: How it helps
Unemployment insurance ensures that you receive a monthly benefit if you lose your job through no fault of your own. This can be crucial in covering mortgage payments and other essential expenses while you look for new employment.
Waiting periods in ASU insurance
Most ASU policies have a waiting period before benefits begin. This is typically between 30 and 90 days. Choosing a shorter waiting period may result in higher premiums.
Sickness cover and income protection: key differences
Sickness cover under ASU is designed for short-term financial support, while income protection cover offers long-term security for those unable to work due to illness or injury.
How long do ASU payments last?
Most policies provide monthly benefit payments for 12 to 24 months. Long term income protection policies, on the other hand, can cover you until retirement.
ASU cover for mortgage payments
Many homeowners take out ASU insurance specifically to cover mortgage payments. This ensures that their home is protected even if they are unable to work.
How much does ASU insurance cost?
The cost of ASU insurance varies based on factors such as age, occupation, coverage level, and waiting period. Policies with a longer waiting period tend to have lower premiums.
Pros of ASU insurance
Provides financial security during uncertain times.
Helps maintain monthly outgoings and mortgage repayments.
Flexible cover options to suit different needs.
No need for a medical examination to qualify.
Cons of ASU insurance
Limited benefit period (usually 12-24 months).
Exclusions for pre-existing conditions.
Premiums can increase with age.
How to choose the right ASU insurance policy
Consider your financial obligations.
Compare waiting periods and benefit durations.
Assess your employer’s sick pay and redundancy package.
Look for policies that offer the best coverage for your needs.
Alternatives to ASU insurance
Income Protection Insurance: Offers longer-term financial support.
Critical Illness Cover: Pays a lump sum if diagnosed with a serious illness.
Savings and Emergency Funds: Provides financial backup without reliance on insurance.
ASU insurance and the self-employed
Self-employed individuals do not qualify for statutory sick pay, making ASU or income protection an essential consideration.
Understanding exclusions in ASU insurance
Policies typically exclude claims resulting from pre-existing conditions, voluntary unemployment, and high-risk occupations.
How to claim on an ASU policy
Notify your insurer as soon as you are unable to work.
Provide evidence such as medical certificates or redundancy letters.
Wait for the agreed waiting period before payments begin.
Do you need ASU cover if you have savings?
If you have substantial savings, you may not require ASU insurance. However, for those without financial reserves, ASU provides essential security.
Government support vs. ASU insurance
While statutory benefits provide some financial relief, ASU insurance offers a more reliable and sufficient source of income during periods of unemployment or illness.
Is ASU insurance worth it?
For many, ASU insurance is a worthwhile investment to protect against financial instability. If you rely on your income to cover essential expenses, ASU can provide much-needed peace of mind.
Conclusion
Accident, sickness and unemployment insurance is a valuable tool for those seeking financial security in the event of unexpected job loss or illness. While statutory sick pay and other government assistance exist, they are often not enough to cover mortgage payments and other necessary expenses. By choosing the right ASU policy, you can ensure that your financial commitments are met, giving you peace of mind and stability during challenging times.