Accident, sickness and unemployment insurance is designed to provide you with protection and to cover your income or mortgage payments should you be unable to work in the UK as a result of an accident or illness. This type of insurance provides cover to enable you to maintain a reasonable standard of living.
Out of the total amount of people currently unemployed in the UK roughly 2 million are absent from work for longer than six months due to a long-tem illness or injury, so taking out accident, sickness and unemployment insurance may be worthwhile.
Types of cover
ASU – Accident, sickness and unemployment cover is a suite of income protection products sold as a single entity. These policies provide you with a tax-free monthly income if you’re unable to work as a result of long term sickness, incapacity or unemployment. However, the unemployment bit is usually an ‘extra’ for an additional premium.
An ASU policy generally covers up to 60% of your gross salary, before tax and National Insurance is deducted. ASU will pay out a guaranteed level of income every month for as long as your qualifying incapacity continues – if necessary right up to the day you officially retire.
Policies cannot be cancelled by the insurer and most will allow you to make as many claims as you’re eligible to make. In addition, the monthly payments are linked to the Retail Prices Index (RPI), depending on the premium you’re prepared to pay, meaning they automatically keep up with the cost of living.
Costs of cover
The cost of your plan will depend on several factors. These include your age, your gender, your level of cover, whether you’re a smoker, your occupation and the deferred period you select.
Premiums are generally guaranteed throughout the term of the policy, so you’ll always know how much you have to pay, although this guarantee usually doesn’t apply to unemployment cover, where premiums can often fluctuate.
A deferred period is the amount of time you feel you can go without making a claim, e.g. the period between having an accident/falling ill/made redundant and requiring the first monthly payment. The longer you can last without making a claim, the cheaper your monthly premiums will become.