A guide to accident, sickness and unemployment insurance
You may have heard of accident, sickness and unemployment insurance but never really appreciated the benefits of what it can do for you.
Also known as ASU insurance, accident, sickness and unemployment cover will be there for you if you became unable to work or if you were made involuntarily redundant. Should this happen, the policy will step in and help replace your income, freeing you up from financial worry at an already difficult and stressful time.
Some providers also offer Carer Cover on top of the standard accident, sickness and redundancy insurance cover. So this means that if you are forced to give up your employment to become a full time carer for a loved one, then the policy will provide an income for a pre-agreed period f time.
As you can see, an ASU policy really is a financial knight in shining armour at an otherwise fraught financial time.
How does it work?
Accident, sickness and unemployment insurance does what it says on the tin – insuring your finances against whatever life throws at you by providing anywhere up to 12 – 24 months worth of protection, subject to the individual provider’s policy terms and conditions. After this period of time the policy would cease paying out regardless of whether you had found work or made a recovery but in most cases, the 12 or 24 months’ cover should provide adequate protection for the average worker.
When could I make a claim on the ASU policy?
As does the length of time the benefits are paid out differ between providers, so does the time you have to wait before you can make a claim. Some providers will begin paying out on your policy once you have been incapacitated or unemployed for 30 days but with others this could be as much as the 90th day, so always check before taking on the policy. Obviously, if you opt for cover that does not start to pay out until 90 days after the covered event happens, this means that you will have three months where you are financially on your own, so you need to bear this mind as to whether you could survive without an income for this long.
Also look out for providers who backdate the protection to the first day of you losing your income to unemployment or from being incapacitated. This additional benefit of your accident, sickness and unemployment insurance policy means that you do not suffer financially in the event that you lose your income through no fault of your own.
Types of cover
Accident, sickness and unemployment cover can also be known as payment protection insurance (PPI). A payment protection policy can be taken in the form of loan, mortgage or income payment protection insurance and allows you to have cover that is either debt specific or just provides a general income.
Protect your home with mortgage payment protection cover
If you have mortgage repayments to maintain then you could give some thought to taking out accident, sickness and unemployment insurance in the form of mortgage payment protection insurance (MPPI). As it is essential to keep on top of your mortgage repayments to avoid the chance of falling into arrears, this form of mortgage cover can be a lifeline if you become unemployed or incapacitated. With protection behind you there would be a substantial amount of money there each month towards ensuring you could maintain your repayments.
It can also help with mortgage related costs such as home insurance; life and / or critical illness cover; and council tax bills.
Cover your loan
Loan payment protection insurance is another form of ASU cover that could help to keep you on top of your loan repayments. The income supplied from the cover would ease the stress of unemployment of incapacity and keeping up with the repayments of your loan even at a difficult financial time means that you would also be able to maintain your credit file. As this is one of the first things looked into by all lenders your chances of obtaining credit in the future are greater if you have a good credit rating.
Providing a general income
Income payment protection insurance taken out as accident, sickness and unemployment insurance would give you freedom of having an income to do what you like with when yours is lost. You would not be limited to covering a specific debt as you are with the other two forms of payment protection. The income would be yours to do with as you wished and could be spread between bills which could then be paid on time or used for general day to day costs such as groceries, fuel and even clothing costs.
What do I need to do to take out this cover?
You could take out accident, sickness and unemployment insurance with a standalone provider and this would be one of the biggest ways to save on your insurance. Loan cover could be as much as 80% less and mortgage cover 40% less than if you have the protection added into the loan or mortgage at the time of borrowing from a High Street bank or lender.
With an independent payment protection provider you choose how much accident, sickness and unemployment insurance cover you need by deciding how much of your repayments or income you want to insure and paying for it based on every £100 worth of protection required.
All providers will state a limit as to how much you can insure (which is typically £1,500 per month or half your gross monthly income) and this is the sum of money paid back tax free after the initial 30 - 90 day waiting period.
Accident, sickness and unemployment insurance really can provide peace of mind and at a low cost, with standalone providers of the cover charging just from a few pounds every month for every £100 worth of protection required. If it is something that you have never considered before, maybe now is the time to look at taking out the insurance and protecting yourself and your family against the financial horror of redundancy of being incapacitated.
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