What is Accident, Sickness and Unemployment insurance?
Precious few of us would welcome the thought of being struck down by an unexpected illness and having to quickly learn to accept and adjust to the subsequent problems it would throw up, coming to terms with the aftermath of being involved in a serious accident or coping with the prospect of finding themselves out of work due to equally unforeseen circumstances (i.e. involuntary redundancy).
It’s not something any one of us would care to dwell on for too long either, as the thought is a depressing one. That said, reality often bites, and the result can put a strain on more than just your emotional state and relationships with those around you.
Without exception your personal finances will take a hit as a direct result of your main income stream being dealt such a massive blow, and you’ll be forced to take drastic measures to ensure any semblance of fiscal continuity.
“Accident, Sickness and Unemployment (ASU) cover is ideal if you find yourself unable to earn for a short period of time (usually up to 24 months).”
The fact of the matter is that without having the necessary insurance cover in place to cushion that blow and share a good percentage of the burden means most people would struggle to achieve this.
Thankfully there are preventative measures you can take to avoid being totally engulfed by the situation and overwhelmed by the fallout of the obvious monetary shortfall you’d have to face up to in the short and medium term, and when getting to grips with any of the outlined, income-hampering scenarios.
Unfortunately there’ll always be some people who – either eternally optimistic or blissfully ignorant to a certain degree – won’t believe that fate will cast its spell on them, and ill-advisedly turn a blind eye to the various ways and means of safeguarding their personal finances. This may also be due to their current fiscal circumstances, which to their minds dictate that accident, sickness and unemployment insurance is just one monthly outgoing too far. But trust us when we say that this is tantamount to false economising, and that in the long term those who don’t protect their very source of livelihood might well rue the day(s) they chose to ignore it. Scare-mongering aside, accident, sickness and unemployment cover is hugely important in the grand scheme of life and insurance things, and seriously should never be overlooked or looked upon as an insurance bridge too far.
Accident, sickness and unemployment insurance tends to cover a multitude of often unavoidable sins, or rather life and career-related occurrences and insurance industry umbrella guises. Like for example bill protection insurance (otherwise known as short term income protection) and mortgage payment protection insurance, which are essentially both separate forms of accident, sickness and unemployment insurance. The acronym of which – and commonly used to describe these policies – is ASU, just for the record.
In its simplest form, accident, sickness and unemployment insurance is the ideal policy to have in place should you be worried about how you might cope from a financial perspective should you lose your employment (and subsequent means of income) as a direct result of redundancy or ill health/serious injury. It’s possible to arrange a specific accident, sickness and unemployment insurance package which is tailored toward one particular outstanding debt, so that any future policy pay-outs will be channelled into a sole – and pre-agreed – repayment plan.
To the uninitiated it’s worth noting that accident, sickness and unemployment insurance policies are time limited by definition, and as such will only ever pay-out over a set – and previously determined – period of time. Typically this ranges anywhere from a handful of months through to a couple of years; although if you plump for more expansive income protection plan then this will traditionally continue to pay-out on a monthly basis until one of two milestones elapse. Either the policyholder is deemed fit enough to return to employment/finds an alternative means of employment if redundancy has necessitated the claim in the first instance, or the end of the policy term is reached.
Various restrictions also come into effect at the point of enquiry on ASU’s, with one of the predominant stipulations being that the potential policyholder is not under risk of unemployment when they instigate the policy.
While the self-employed won’t be eligible to receive specified ‘unemployment’ cover, there’s nothing stopping them from benefitting from the separate accident and sickness elements of any ASU cover, if itemised and purchased accordingly at the right juncture.
Do I need Accident, Sickness and Unemployment cover?
Yes, but then again, no, if you are already covered by a similar policy from employment entitlements. That’s to say if your current employer offers you a staff benefits package which makes provisions for a longer period of sick pay than is the accepted statutory norm.
ASU cover tends to generally recompense the policyholder for shortfalls on existing mortgage and loan payments and other more general bills, which makes it differ from a more conventional payment protection insurance (or PPI) on the grounds that it doesn’t just meet the cost of a specific debt for the most part. Again, worth observing that the policyholder – and NOT the ASU-providing insurer – is responsible for repaying the mortgage/loan debt, which is also the case if you receive mortgage protection insurance; which is paid out directly to the policyholder.
Accident, sickness and unemployment insurance will NOT be made available to the policyholder with immediate effect either, and on average requires the claimant to have experienced a period of at least a month to pass before ASU is sanctioned and any release clause is triggered.
Some accident, sickness and unemployment policies afford the policyholder the right to defer the first payment – received as part of the initialisation of the claim – as long as they see fit; which in turn paves the way to cheaper monthly premiums the more extended that first period is (30 days, 60 days, 90 day and 120 days before making a claim).
With this in mind, it’s sometimes in the best (financial) interests of the would-be policyholder to factor in any long-term support a present employer might contractually oblige, which ultimately allows you to minimise the price of your ASU plan per se. On the topic of policy lifecycles, the longer the overall term of the cover, the more expensive it will be.
If you do plan to buy time between any potential period of sustained unemployment (through redundancy, injury, illness, etc… – and you don’t have extended employer sick pay to rely on) it is of course a good idea to have some additional savings to fall back on so that you’re able to compensate for the passage of time between the cessation of your role and the first ASU payment coming to bear.
As an extra contingency plan – and if unsure as to what you are entitled to from a current employer perspective – it makes retrospective sense to request what’s referred to as a ‘Back to Day 1’ accident, sickness and redundancy policy. The proviso here is that you’re out of work for a minimum of 31 consecutive days, in which case any subsequent claim/payment will be back-dated to effectively commence from the very first day that the policyholder was classed as unemployed/unable to fulfil the remits of their existing role on account of ill health/injury.
As a final point in this section, it’s prudent to suggest that ASU is probably NOT the best insurance policy to take out in the event of the policyholder not being able to resume their normal employment duties for an indefinite period, as accident, sickness and unemployment cover is more geared up towards those people affected by unforeseen events of the more short-term in nature; and therefore might not give you the same peace of mind in the longer run. Not when compared to the more favourable critical illness insurance or income protection insurance policies.
How much does Accident, Sickness and Unemployment cover cost?
This can only really be determined by the type of ASU cover you agree with your accident, sickness and unemployment provider at the point of signing up and policy purchase.
Outlining the three main options you have, these are namely; accident, sickness and unemployment cover, accident and sickness cover and simple, unemployment cover. This triumvirate of individual plans cater for the individual based on personal needs and finances with wriggle-room enough to be tailored to specific requirements.
The first option will continue to pay-out on a successful claim for a period of between 12 or 18 months from inception as does the third option, while the second package (accident and sickness cover alone) gives the policyholder a selection from 12, 18 or 24 months.
Excepting the type of cover, premiums are calculated as a percentage of your gross income (usually between 50% – 65%), which is then capped by a maximum monthly limit (more normally up to £1,000 and £2,000 per month). Looking at just how they are calculated and ASU insurance policy experts are quick to point out that these premiums are determined by a number of factors, including the policyholder’s age, the very repayments you’re seeking to protect, the term of the claim period, the deferment period and the fiscal amount of cover you need. What’s more, it’s commonplace for accident, sickness and unemployment insurance policy providers to also take into account your occupation (to help ascertain risk element) and whether or not you’re a smoker (which could bear an influence on the policyholder’s health and moreover they’re likelihood of being prone to certain serious illnesses).
What can I do to reduce the cost of Accident, Sickness and Unemployment insurance?
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